Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — BASUTOLAND, BECHUANALAND AND SWAZILAND

United Nations (South Africa)

Mr. Biggs-Davison: asked the Secretary of State for the Colonies whether the Expert Committee established by the United Nations Security Council to report on the feasibility, effectiveness and implications of sanctions against the Republic of South Africa was requested to take into account the likely effect of such sanctions on Basutoland, Bechuanaland and Swaziland; and what is the policy of Her Majesty's Government in this respect.

The Under-Secretary of State for the Colonies (Mrs. Eirene White): The United Kingdom representative drew the Expert Committee's attention to these effects on a number of occasions. He pointed out that the conclusions of the Committee considerably underestimated the very serious implications for these Territories if economic measures were decided upon, and said that if such measures were decided upon collective steps would have to be taken in mitigation.

Mr. Biggs-Davison: Will Her Majesty's Government support Seretse Khama and Chief Leabua Jonathan and all in those Territories who are working for the best possible neighbourly relations with South Africa, the importance of which was demonstrated by the gift of grain to Basutoland at the time of extreme drought in both countries, and can we now take it that because of Her Majesty's Government's responsibilities towards these Territories the idea of

taking part in any sanctions against South Africa is utterly ruled out?

Mrs. White: As far as the attitude of local heads of Governments in the Territories are concerned, of course, we naturally sympathise with them and wish to co-operate with them. As far as any other action is concerned, I would remind the hon. Gentleman that this Report is to be discussed by the Security Council, and I think that it would be inadvisable for me to say anything further until that occasion arises.

Mr. Amery: May I ask that the hon. Lady will at least assure us that we will not take any steps in the matter without the full agreement of the heads of the Protectorate Governments concerned?

Mrs. White: We would, of course, consult with them, but they are still dependent Territories and it is for Her Majesty's Government to take decisions of policy.

Mr. Lubbock: Is the hon. Lady aware that the amount of help which we are giving to Bechuanaland and these other Territories is pitifully small in relation to their needs, and that, bearing in mind the fact that these Territories had to put up with five years of drought, an enormous expansion of support for their economies is needed?

Mrs. White: I have very much sympathy with what the hon. Gentleman says, but I do not think that it arises out of this Question.

Oral Answers to Questions — HONG KONG

Chinese Refugees

Mr. Mathew: asked the Secretary of State for the Colonies why 38 Chinese refugees are to be repatriated to the Chinese mainland by the British authorities in Hong Kong.

Mrs. White: I refer the hon. Member to my right hon. Friend's reply on 24th June to the hon. Member for Brighton, Pavilion (Sir W. Teeling).

Mr. Mathew: Yes, but is the hon. Lady aware that, although no request was made until the day after they had been hurried back to China, it appears that no steps were taken to find out whether there were


politically suspect to the Communist authorities and in whose case, therefore, return to China would be tantamount to a sentence of death, or any attempt made to offer them facilities to go elsewhere than Hong Kong, such as Formosa, facilities which we now know did exist?

Mrs. White: My information is that the persons concerned did not claim political asylum and not one of them made any request to go to Formosa.

Ministerial Visits

Mr. Rankin: asked the Secretary of State for the Colonies when he proposes to visit Hong Kong.

Mrs. White: My right hon. Friend has no plans at present for a visit to Hong Kong but hopes that a visit by him or another Colonial Office Minister can be arranged before long.

Mr. Rankin: May I thank my hon. Friend for that Answer and hope that the implied promise will materialise very soon? Is she aware that during my visit to Hong Kong I found many people who were disappointed that at Government level visits were too short and too far between and that at ceremonial level they were non-existent? May I ask my hon. Friend to look into these two aspects of what is a problem for the people of Hong Kong?

Mrs. White: As my hon. Friend knows, my right hon. Friend and I have visited more than half of the Colonial territories since we took office. We will certainly try to arrange a visit by one or other of us to Hong Kong.

Mr. Amery: While paying tribute to the visiting zeal of the right hon. Gentleman and the hon. Lady, may I ask for an assurance that there is no question that Hong Kong will be transferred to the Ministry of Pensions?

Mrs. White: I do not think that there is any danger of that at the moment.

Lantau Island

Mr. Rankin: asked the Secretary of State for the Colonies what developments are proceeding at Lantau Island; and what is their purpose.

Mrs. White: Work is in progress to extend the catchment area of Shek Pik reservoir and an extension of the coastal road to Tai O is being planned. No major public works are planned. Some private development is taking place including one fairly substantial industrial project in North East Lantau.

Mr. Rankin: Is there, then, no substance whatsoever in the suggestion which I met in many places that there is a prospect of the overcrowded population in Hong Kong being ultimately transferred in part to Lantau Island which is larger than the island part of Hong Kong'? Is that a possible prospect for the future?

Mrs. White: Not in the immediate future. This has been considered, but at present the Hong Kong Government are concentrating on building new towns on the mainland at Castle Peak and Sha Tin.

Oral Answers to Questions — SOUTH ARABIA

Constitutional Commission

Mr. Wall: asked the Secretary of State for the Colonies if he will make a statement about constitutional progress and the security situation in Aden.

Mr. J. Amery: asked the Secretary of State for the Colonies if he will make a further statement on the proposed Constitutional Commission on South Arabia.

The Secretary of State for the Colonies (Mr. Anthony Greenwood): In my statement on 11th May I announced my intention to appoint a Constitutional Commission for South Arabia and on 24th May I informed the House that Sir Evelyn Hone had accepted appointment as Chairman. I am now pleased to be able to inform the House that I have appointed Sayyid Muhammed Abu Rannat and Mr. Noel Coulson to be members of the Commission. Sayyid Muhammed was until 1964 Chief Justice of the Sudan where he headed important constitutional commissions, and is a member of the United Nations Sub-Commission on Prevention of Discrimination and Protection of Minorities. Mr. Coulson is Reader in Islamic Law at London University and will shortly take up the Chair of Law in the Ahmadu Bello University in Nigeria.
The Commission will begin its work as soon as possible and I know that the


House will share my hope that all sections of the people of South Arabia will take advantage of the Commission's visit to discuss the constitutional future of the area constructively, and to make their views known to the Commission. It is in this way, as I have said before, that we shall be able to make real progress towards our goal of an independent Arab State in South Arabia not later than 1968.
The security situation in Aden continues to give cause for alarm. The externally controlled National Liberation Front has been responsible for a succession of incidents in recent weeks involving, I am sorry to say, the death of four people, including the Naib of Shaib, and injuries to a number of others. The House will, I know, wish to join in expressing sympathy with the relatives of the victims of these cowardly and senseless attacks.

Mr. Wall: While welcoming the Secretary of State's statement about the Commission, does he not agree that one of the reasons for the deteriorating situation is that certain people believe that Her Majesty's Government are not fully behind the Federal Government? Will he take the opportunity to say whether Her Majesty's Government fully support the Federal Government in the South Arabian Federation?

Mr. Greenwood: There is no reason to believe that we are not fully behind the Federal Government. We value the co-operation which they have given in making effective the work of the Constitutional Commission.

Mr. Amery: What is the point of the Commission now? As we understood it, the right hon. Gentleman was trying to send a broadly based representative Commission which would carry the support of international public opinion. It is now a rump Commission. What is the point of it in this context? Since it is very important that all those who see the Commission in Aden should know where they stand and where the Government stand here at home, can he confirm that when the Government make proposals after the Commission has reported there is no question of their using the formal advice provision of their treaties with the rulers to try to enforce their own particular solution?

Mr. Greenwood: I am sorry that the right hon. Gentleman should use terms like "rump" Commission, which are not calculated to make the work of the Commission easier. The important thing about the Commission is that it should get discussions going in the whole of South Arabia and try to bridge the gap which at present exists between the Federal Government and the other Governments and parties. On his second point, I informed the Federal Government some time ago of our readiness to sign an amending treaty concerning our advisory powers. There have been some drafting difficulties, but these have now been removed and I hope that an amending treaty will be signed in the next few days.

Mr. Jackson: Could the Secretary of State make it clear through the Commission that Her Majesty's Government are very anxious that those political figures who are leaders of popular political movements in Aden will be welcomed to give evidence and that the whole purpose of the Commission is to advance the genuine independence of Aden and the South Arabian Protectorate?

Mr. Greenwood: They will be very welcome indeed. I shall be disappointed if all the political figures do not take advantage of the opportunity which the Constitutional Commission offers.

Mr. William Yates: In order to make this Commission completely understood in the Arab world, will the right hon. Gentleman consider making a personal visit both to Cairo and to Riyan so that there is no possible misunderstanding of Her Majesty's Government's intention to honour the United Nations Resolution in the matter of South-West Arabia?

Mr. Greenwood: I should need to give careful consideration to that suggestion in present circumstances.

Mr. Amery: The right hon. Gentleman has expressed the hope that leaders of the political parties will discuss with the Commission. Is he not aware that leaders of at any rate two of the main political parties appear to have taken refuge in the Yemen?

Mr. Greenwood: I do not think that the phrase "taken refuge in the Yemen"


is the correct way to describe it. There is reluctance on the part of some leaders to discuss with the Commission. I hope that this has arisen from a misconception of the purpose of the Commission and that when it is on the spot and doing the valuable work which we have entrusted to it the political leaders will realise the value of taking advantage of the situation.

Oral Answers to Questions — GIBRALTAR

Political and Economic Assistance

Mr. Wall: asked the Secretary of State for the Colonies if he will make a statement about political and economic help to Gibraltar.

Mr. Fisher: asked the Secretary of State for the Colonies what political and economic measures he now proposes to take in order to implement the undertaking in Command 2632 that Her Majesty's Government will defend and sustain the people of Gibraltar.

Mrs. White: My right hon. Friend and I will be meeting the Chief Minister of Gibraltar next week and hope it will be possible for a statement about further help to be made after our meeting.

Mr. Wall: Will the hon. Lady consider doing something positive to help Gibraltar? Would she consider recalling our Ambassador or putting a surcharge on Spanish imports into this country and using the proceeds to help the Gibraltar economy? Gibraltar wants something positive and not just talk.

Mr. Fisher: Would the hon. Lady agree that, when the Prime Minister told me in the House recently that the Government are defending and sustaining the interests of the people of Gibraltar, this was not the truth and that, because it was not the truth, the people of Gibraltar are now becoming increasingly disillusioned by all these promises which are never accompanied by performance? Could the hon. Lady tell the House precisely what the Government are doing both to restore the economy of Gibraltar by way of aid and also, politically, to defend the interests of the people which the Prime Minister said the Government were doing?

Mrs. White: On the question of aid, the hon. Gentleman will, of course, appreciate that until the Overseas Development and Service Bill is fully enacted one cannot make formal announcements of aid. We are discussing this matter with the Chief Minister of Gibraltar next week. It will be more appropriate to have those discussions with him before making announcements of detailed allocations in the House.
On the other matters, as the hon. Gentleman knows very well, so far, we have decided, in the best interests of Gibraltar, not to take the retaliatory action which would undoubtedly give some emotional satisfaction in Gibraltar but might not necessarily, at this time, be in their best interests. In this reply, in the House recently, my right hon. Friend the Prime Minister made it clear that this is not an absolute position by any means. One has to judge the situation as it appears at the time.

Mr. Crawshaw: While hon. Members on both sides of the House appreciate that these talks will help, would my hon. Friend bear in mind that the more reasonable our attitude appears to be in this matter the more provocation we seem to receive? It may be that the time is now arriving when the only way to help the people of Gibraltar is to take a very firm stand by hitting the Spanish Government in their pocket, where it hurts most.

Mrs. White: To get the record straight, there has been no intensification of restrictions since March, as far as the people of Gibraltar themselves are concerned. [Interruption.] I am aware of that. I want to make it clear that there has been no worsening of the situation, tiresome as it is for all concerned—[HON. MEMBERS: "There has been no improvement."] I agree that there has been no improvement except in so far as people going to and from Tangier are being allowed free entry and exit at the frontier. We fully sympathise with the people of Gibraltar. [HON. MEMBERS: "Words!"] I think that after the talks next week there will be considerable assistance to Gibraltar to be reported to the House, but it is better to discuss this with the Ministers of Gibraltar first.

Mr. Sandys: Does not the hon. Lady realise that sympathy is not enough and


that the people of Gibraltar feel that they have been very badly let down by the British Government? Will she consider what I asked for the other day—either taking action or making a full statement to the House as to what are the courses which the Government have considered and why they have rejected them?

Mrs. White: I keep insisting that it is not only a question of sympathy. We are making proposals to the Chief Minister of Gibraltar for very substantial aid, but I repeat that it is not proper to discuss that until we have discussed it with him.

Mr. Thorpe: Would the hon. Lady not agree that the formation of a coalition Government in Gibraltar is clear evidence of the united determination and the spirit of unity on the Rock at the moment? Would she not agree that it is disgraceful that, whilst the income of the Rock has been cut by nearly 40 per cent. by the activities of Spain, the Spanish workers who now take £50,000 a week out of the Rock are not allowed to spend one penny of that money in sterling? It must all be changed into pesetas so that the Spanish authorities can get the maximum amount of hard currency for the Spanish account. Is there not a case for considering a limit on the amount of sterling which the Spanish workers can take out? Would she not agree that at least £2 million is needed for housing problems in Gibraltar, without even touching the condition of the 600 refugees who are living in emergency conditions? When are the Government going to do something?

Mrs. White: In regard to the position of the Spanish workers, one has to look at this in the totality of the needs of Gibraltar. One could withdraw the whole lot of Spanish workers by refusing them egress, but whether that would be in the best interests of the economy of Gibraltar at this time is another matter.

Mr. Biggs-Davison: In view of the unsatisfactory nature of that reply, I beg to give notice that I will raise the matter on the Adjournment at the earliest possible opportunity.

Chief Minister (Message)

Mr. Dodds: asked the Secretary of State for the Colonies if he will state the nature of the message sent to him by telegram from Sir Joshua Hassan, Gibraltar's chief minister, in respect of the demonstrations on Friday 2nd July; and what has been his reply.

Mrs. White: The message said that my right hon. Friend's replies to the Question by the hon. Member for Torquay (Sir F. Bennett) on 5th July, about the demonstrations in Gibraltar on 2nd July, had been interpreted in Gibraltar as an attempt to minimise the expression of the indignation and strength of feeling there about the Spanish campaign against the Colony.
My right hon. Friend has assured the Chief Minister that Her Majesty's Government are fully aware of the strength of feeling in Gibraltar about the campaign. He pointed out that he had acknowledged this in the course of his replies.

Mr. Dodds: Is my hon. Friend aware that many reasonable Gibraltarians who are fanatically attached to this country are appalled that when tensions are so high members of our Armed Forces stationed there should, despite being requested not to do so, cross the frontier in polo kit? Is she aware that they have done the same thing again this weekend? While it is appreciated that many of the problems are not easy to control, would it not be the decent thing to request—not instruct—the officers concerned to restrain themselves at the moment even if they are fanatically attached to polo in Spain?

Mrs. White: I am sure my hon. Friend will realise that requests, still less orders, to officers do not emanate from the Colonial Office. There is no restriction on anyone walking across the frontier. It is therefore a question of decision as to whether it is advisable for this to be done. The matter has, of course, been drawn to the attention of the authorities concerned, but it is not a question for the Colonial Office.

Sir F. Bennett: Does the hon. Lady recall that in a very recent exchange I advised her of the folly of seeking to


minimise what is taking place in Gibraltar? She has done very nearly the same thing again today by omitting the first sentence of the telegram, which says that great resentment has been caused in Gibraltar. Will she now accept the point and not again and again try to minimise the reaction of people of Gibraltar?

Mrs. White: The answer is perfectly clear. We do not attempt to minimise the situation. We fully understand the strength of feeling in Gibraltar, which was demonstrated on the occasion when the hon. Gentleman himself was present. We are by no means insensible to the strength of feeling and the emotions naturally aroused by the difficult conditions in which the Gibraltarians find themselves. We have replied to the Chief Minister making this indubitably clear.

Housing

Mr. Jackson: asked the Secretary of State for the Colonies what further steps Her Majesty's Government propose to take in order to ease the present housing situation in Gibraltar.

Mrs. White: To build more housing will of course cost more money. My right hon. Friend hopes to be able to inform the Gibraltar Government very soon of their allocation under the Overseas Development and Service Act. I understand that it is the intention of the Gibraltar Government that a substantial amount of this money should be used to finance more housing.

Mr. Jackson: Will my hon. Friend bear in mind the miserable housing conditions now affecting the people of Gibraltar, that there were 1,400 people on the waiting list before 500 more came in from the Campo area and that only 414 flats were designed to meet that list? Will she also bear in mind that one person has been on the list for 11 years and still has not enough points to qualify?

Mrs. White: What my hon. Friend says emphasises that the housing difficulties in Gibraltar are not entirely due to the recent restrictions but are longstanding and due to past neglect. We are hoping both to make further financial assistance available and also to arrange for technical advice to speed up the physical process of building.

Sir A. V. Harvey: In view of the difficult situation of Gibraltar, will the hon. Lady represent to the Government that this is the time to be extremely generous to Gibraltar in sustaining the morale of its people and giving them, within limits, all they ask for?

Mrs. White: "All they ask for" is a very tall order for anyone. We are discussing this matter next week with the Chief Minister and hope to be able to meet most of his requests.

Mr. David Steel: May I also appeal to the hon. Lady to be generous in this matter? Gibraltar has a very creditable record of spending £5½ million on rehousing half the population since the war, and a sum of £2 million would be required to rehouse priority cases without touching the refugees.

Mrs. White: I cannot accept the hon. Gentleman's figures, but I would be glad to discuss it with him later.

Mr. Dodds-Parker: In the circumstances, will the Government allow unrestricted immigration into this country from Gibraltar under the Commonwealth Immigrants Act?

Mrs. White: That is quite a different Question.

Oral Answers to Questions — EAST CARIBBEAN

Independence

Mr. Fisher: asked the Secretary of State for the Colonies to which of the smaller island territories in the Eastern Caribbean Her Majesty's Government intend to grant independence as individual and unfederated nations within the next three years.

Mr. James Johnson: asked the Secretary of State for the Colonies what are his intentions regarding future constitutional advance of the smaller islands of the Eastern Caribbean usually known as the Little Seven.

Mr. Greenwood: When the result of the consideration which is being given by the majority of these territories to Federation is known, we shall be in a better position to take a comprehensive look at the constitutional future of all the territories in the area.

Mr. Fisher: As the communiqué of the Commonwealth Prime Ministers' Conference stated categorically that Britain would bring all or some of the Eastern Caribbean islands to independence in the next three years, either in a federation or separately, would the right hon. Gentleman bear in mind that these are very small islands? Does he think that they could sustain independence separately in the modern world—except, of course, for Barbados? Could he take the House into his confidence and state whether there is any hope of reviving federation or, alternatively, proposing some other grouping, possibly of the Windwards, within a confederation of the West Indies?

Mr. Greenwood: For the sake of accuracy of the record, I should quote the Commonwealth Prime Ministers' communiqué in which it was said that
It was hoped that many of these remaining dependencies would reach independence in the next three years, including Basutoland … and also some or all of the territories in the East Caribbean, whether in a federation or separately.
The communiqué meant independent in a federation or separately, as the hon. Member said. We are still awaiting the White Paper which the Government of Barbados had hoped to produce by the end of June. When we know what is the attitude of the Barbados Government to federation we shall then know better what the prospects of federation are and what further consideration must be given to the constitutional position of the other islands in the East Caribbean. At the moment none of the possibilities which the hon. Member described is excluded.

Mr. Johnson: Does not my right hon. Friend think that there are too many big fish in a little pond? Even if the biggest fish, Barbados, were independent—I think it could be independent, with a quarter of a million people—could not there be a federation, if we were to give more economic aid, of the other six territories—possibly if we give £8 million to £10 million to help them?

Mr. Greenwood: My hon. Friend knows the importance and desirability of federating the territories of the East Caribbean. We have made it clear in the

past that we should not exclude the possibility of the six to which he referred forming a federation.

Oral Answers to Questions — BASUTOLAND

Elections

Mr. Hugh Jenkins: asked the Secretary of State for the Colonies, what allegations he has received of malpractices in the recent Basutoland elections; and if he will make a statement.

Mrs. White: My right hon. Friend received a memorandum from the Basutoland Congress Party which contained a number of allegations about the conduct of the recent elections in Basutoland. It would not be appropriate for me to comment on these while four election petitions are pending in Basutoland.

Oral Answers to Questions — ADEN

Franchise

Mr. Rose: asked the Secretary of State for the Colonies what steps he is taking to widen the electoral franchise in Aden.

Mr. Greenwood: I have made clear that I should very much like to see some widening of the franchise. This is primarily a matter for the Aden Government and Legislative Council, but I hope that in due course Aden State Ministers may be willing to hold all-party consultations on the subject.

Mr. Rose: Will my right hon. Friend confirm his intention of supporting eventually universal suffrage in Aden? Will he make it quite clear that the progress of Aden towards self-government and independence will not be impeded by any strategic considerations arising from the east of Suez policy?

Mr. Greenwood: I have made it clear that this is primarily a matter for the Aden Government and the Legislative Council. I should not go beyond my previous reply.

Mr. Sandys: Is this a matter which will be taken into account by the Commission or is it outside their terms of reference? If it is within their terms of


reference, may I ask the right hon. Gentleman not to prejudge any views which they may express?

Mr. Greenwood: It is not specifically a matter for consideration by the South Arabian Constitutional Commission, but I have no doubt that they will take into account the Aden franchise in considering recommending any franchise for the whole of South Arabia. It would be wrong for me to prejudge any decisions or advice which they may give.

Mr. Sandys: Is not that just what the right hon. Gentleman has done in his earlier Answer when he said that he strongly hoped that there would be a widening of the franchise?

Mr. Greenwood: That is a view which is very widely held in Aden. It is important that we should not give any indication of the lines along which that widening should take place.

International Union of Socialist Youth

Mr. Rose: asked the Secretary of State for the Colonies whether he has now studied the report of the International Union of Socialist Youth on Aden, a copy of which has been sent to him; and whether he will make a statement.

Mr. Greenwood: I have seen this document. It advocates the early grant of political independence to the population of Aden State. The declared intention of Her Majesty's Government is to lead all the territories of South Arabia, in-including Aden, to independence by not later than 1968. The main purpose of the constitutional commission which I have appointed is to ascertain what form of constitutional arrangement is best suited to the achievement of that end.

Mr. Rose: In particular, has my right hon. Friend seen the section dealing with the punishment of political detainees? Would not he deplore the use of corporal punishment in this way? What new punishments are specified in relation to prisoners in Aden gaols who are refusing food or medical supplies or are making noises?

Mr. Greenwood: My hon. Friend has a Question down on the latter point for Written Answer and will probably receive

it today. The report gives no details of the origin of the photograph in the appendix and there are no precise allegations into which inquiries could usefully be made, but I have submitted the photograph to the High Commissioner for a full report. It is right to say, however, that it is highly probable, though not certain, that the photograph was taken some years ago.

Mr. Amery: The report recommends some extension of the franchise in Aden. Can the right hon. Gentleman assure us, in view of the responsibility of the Federal Government for immigration and external affairs, that no steps will be taken to enfranchise foreigners or recent immigrants without consultation with the Federal Government?

Mr. Greenwood: It would be a great departure from precedent to give the franchise to foreigners under any circumstances. This matter must be discussed with the Aden Government and no doubt the Federal Government's views will be taken into account.

Oral Answers to Questions — COLONIAL TERRITORIES

Oxford Conference

Mr. Bagier: asked the Secretary of State for the Colonies if he will make a statement on the conference held in Oxford under his chairmanship between 8th and 12th July to discuss the future of the remaining Colonial territories.

Mr. A. Royle: asked the Secretary of State for the Colonies if he will make a statement on the conference of Governors held at Oxford.

Mr. Greenwood: The conference was convened to discuss various aspects of the future relationships between Britain and the smaller Colonial Territories. In addition to the officials who were present, I invited a number of Governors and Administrators, academics, businessmen and others who have taken a special interest in colonial problems. The discussions were of a general nature and did not relate to the specific problems of individual territories. The main topics which were considered included the organisation of government in small territories; safeguards for democracy, protection of minority rights and civil liberties;


finance, development and the provision of staff; and future relations with Britain. The international aspects of these questions were also discussed.
The conference made a very helpful contribution to our thinking about these questions and I am most grateful to all those who took part.

Mr. Royle: When will the Government be ready to make public their proposals for the constitutional future of the many small territories throughout the world? Will the Minister give an assurance that no consideration is being given at the moment to altering the constitutional position in Hong Kong?

Mr. Greenwood: Certainly there is no question at the moment or in the foreseeable future of altering the constitutional position of Hong Kong. As for the constitutional position of the remaining smaller territories, I am sure that the hon. Member appreciates that the fact that they are still dependencies suggests that there are very special problems involved. Those are the problems to which we are giving active consideration, and in order to get advice about which we convened this conference. I think that it would be wrong to give any overall answer at this stage. I have found the advice which was tendered at the conference very helpful indeed.

Mr. James Johnson: Has my right hon. Friend thought of inviting back-bench Members on both sides of the House to a meeting of this nature, since it is not only governors and colonial officials, past, present and future, who are the people to advise him on the constitutions of Colonial Territories?

Mr. Greenwood: I hope that I have made it clear that it was not only governnors and colonial officials who attended but also a large number of other people who have taken a special interest in colonial problems. This is the first conference of its kind which has been held. My hon. Friend asked about a representation of back-bench Members. He will remember that eight back-bench Members, four from each side of the House, are going to some of the smaller Colonies in order to consider the special problems which they evoke.

Mr. Amery: Will the right hon. Gentleman publish a list, perhaps in

answer to a written Question, in the OFFICIAL REPORT of those who were invited to the conference? On what basis, in particular, was Lord Brockway invited to take part?

Mr. Greenwood: I am perfectly willing to publish a list of those attending the conference. Lord Brockway was invited to take part because he has over a very long period taken a keen interest in colonial matters and represents a point of view which it would have been folly to ignore on an occasion of this kind. I am sure that the right hon. Gentleman will be glad to know that more conservative points of view were also represented at the conference.

Oral Answers to Questions — MAURITIUS

Constitution

Sir P. Agnew: asked the Secretary of State for the Colonies what plans he is making for holding a constitutional conference to determine the future of Mauritius; how the island will be represented at it; and when the state of emergency there is to be lifted.

Mr. James Johnson: asked the Secretary of State for the Colonies what date he has fixed for the coming constitutional talks to determine the independence of Mauritius.

Mr. Greenwood: My proposals for a Constitutional Conference are set out in a despatch to the Governor which was published in Mauritius on 25th June. I have suggested that the conference should open in London on 7th September and have asked the Governor to extend invitations on my behalf to all the parties represented in the Mauritius legislature. I am arranging for a copy of the despatch to be placed in the Library of the House. The question of lifting the emergency is a matter for the Governor to decide and I must leave it to him.

Oral Answers to Questions — BRITISH GUIANA

Constitution

Sir P. Agnew: asked the Secretary of State for the Colonies when the constitutional conference to determine the future of British Guiana and fix the date


for independence is to be held; and if he will make a statement.

Mr. Greenwood: I have suggested to the Governor of British Guiana that the conference shall begin on the 2nd November.

Sir P. Agnew: Does the right hon. Gentleman expect that the fruits of the conference will be an early grant of independence now that British Guiana has shown that it can possess and run a system of stable Government that has persisted now for over half a year?

Mr. Greenwood: British Guiana has perhaps done even better than the hon. Gentleman's wording seems to suggest, but the fruits of the conference are largely a matter for the conference itself. One of the objectives is to discuss the future constitutional provision for British Guiana and to decide what steps are to be taken and the timetable to which they should accord.

Mr. Sandys: Does the right hon. Gentleman realise that his rather circumlocutory way of answering that question will undoubtedly cause doubts in the minds of the people of British Guiana as to whether he is going to carry out the very definite pledge given by the late Government, and confirmed earlier by him, that the purpose of the conference is to fix a date for independence? Can we have it quite clear that that will be the purpose of this conference and that it will not be to fix time tables for procedures, and so on, about which he spoke? Can we be quite clear that the conference will fix a date for independence?

Mr. Greenwood: It is to do all these things, and it is hoped that agreement will be reached about a date for independence. That is what we want. We want to fulfil the pledge that we have already given about independence for British Guiana.

Mr. Sandys: The right hon. Gentleman says that he hopes that agreement will be reached. The decision rests with Her Majesty's Government. Her Majesty's Government are able to decide when independence is to take place. Of course there may be disagreement—we know that there always is disagreement—at this conference on British Guiana, but I hope

that the right hon. Gentleman will make it clear that he intends to carry out the pledge to fix a date for independence. It is within his power to do so. Naturally, he must consult all concerned in British Guiana, but will he give that pledge?

Mr. Greenwood: We have made it perfectly clear that we are holding this conference at the beginning of November in order to carry out the pledges that we have already given about independence. The whole House will realise that the maximum degree of agreement that we can get about changes of this kind the better it is for all concerned, but we have not the slightest intention of walking out on any undertakings which have previously been given.

Oral Answers to Questions — FEDERATION OF SOUTH ARABIA

Beihan (Aircraft Attack)

Mr. J. Amery: asked the Secretary of State for the Colonies if he will make a further statement on the recent attack on Beihan State by Egyptian aircraft.

Mr. Greenwood: In reply to the protest to which I referred in my statement of 30th June, Her Majesty's Ambassador in Cairo has been assured by the U.A.R. authorities that there are standing instructions to their aircraft not to cross the Federation's borders and that the recent attacks on the territory of the Federation of South Arabia, of which the U.A.R. authorities claim to have no evidence of their own, can only have been a pilot's error and that further steps are being taken to ensure that the present instructions are more closely observed in future.
Following other attacks on Federal territory last April, we informed the U.A.R. Government that if there were further incidents of this nature we should at once initiate a discussion of the matter in the Security Council. When the latest attacks occurred we naturally considered whether we should not take action accordingly. After a very careful examination of all the circumstances, however, we concluded that there was a strong presumption that the attacks were due to a pilot's error. We decided therefore to accept their explanation of this particular incident. Our intention remains


to bring before the Security Council any further attacks of this kind. If reference to the Security Council did not end such attacks, we should have to consider the desirability of making a more direct response.

Mr. Amery: In his earlier statement the right hon. Gentleman said that we were seeking compensation and a public apology from the Egyptian authorities. Can we assume from his statement that the Egyptians have agreed to pay compensation and to make an apology? Is the right hon. Gentleman aware that his statement that we would refer the next incident to the Security Council and that if that did not end the attacks consideration would be given to whether we should take action is almost an invitation to the Egyptians to strike at us again? In view of these attacks on British territory and the murder by Egyptian-inspired terrorists of a senior official of one of the Territorial Governments, can he give us an assurance that there can be no question of sending a British Minister to Cairo at this juncture?

Mr. Greenwood: The hon. Member's last suggestion should be put to my right hon. Friend the Foreign Secretary. As for the apology, the important thing in a matter of this kind is to achieve results and not to bother too much about the form of words. We want to stop these attacks taking place. We now have an assurance from the United Arab Republic Government that steps are being taken to ensure that present instructions will be more closely observed in future. If that does not serve its purpose, I hope that my answer has made it clear what are our future intentions. Certain procedures have to be observed in matters of this kind and we propose to observe those procedures.

Mr. Shinwell: When the United Arab Republic delegation came to the United Kingdom the other day and was received with such friendliness, and even emotion, were the views of the British Government about Egyptian intervention in the Yemen conveyed to it? If so, what was the reaction?

Mr. Greenwood: As I made clear in my answer of 30th June my right hon. Friend the Prime Minister made abun-

dantly clear to the Egyptian delegation the strength of feeling we had about attacks of this kind.

AGRICULTURE

Mr. Farr: asked the Prime Minister what decision has now been reached on the further contribution agriculture can economically make to import saving, as a result of his discussions on 6th May.

The Prime Minister (Mr. Harold Wilson): None, Sir. This matter is still under consideration as part of the preparation of the national plan for economic development.

Mr. Farr: Does not the Prime Minister agree that it was never more important than it is today that every sector of our national economy should play its full part? Therefore, will he take steps to free the whole of our agriculture industry from any artificial restrictions, so that it can expand its production, make use of its very high level of efficiency, and make a big saving on our food import bills?

The Prime Minister: I agree with the hon. Member about the importance of any part of our national economy being able to substitute home production for imports. This was the basis of my talk with the National Farmers' Union in May. As for freeing the industry of restrictions, one of the big inhibiting factors that we have to consider in trying to work out this plan is the fact that, unknown to many of us, the previous Government entered into all sorts of agreements which precluded an increase in home production as a means of substitution for imports.

Mr. Loveys: Does not the Prime Minister agree that one of the main difficulties facing the agriculture industry in its attempt to help the import position is the highly unsatisfactory and inefficient anti-dumping legislation?

The Prime Minister: The position there has been that where a case is made to the Board of Trade proving that goods—whether agricultural or industrial—are being dumped into this country, the President of the Board of Trade is able to pronounce whether an anti-dumping duty shall be introduced?

Mr. Heath: When the Prime Minister says that he has been inhibited in


the policy that he wants to follow by agreements entered into by the previous Administration, is he aware that those are the G.A.T.T. Agreements, entered into with the Commonwealth by the Administration of which he was a Member? Is he suggesting that both of those agreements should go?

The Prime Minister: No. I am referring particularly to cereals and to the bilateral agreements with the United States, Canada, Australia and Argentina, which Fledge that Britain will take remedial action if total cereal imports decline below the average level for 1961–63. What this means is that the late Government said that they would prevent British production from increasing if there was any question of imports falling off—whereas the right hon. Gentleman himself was perfectly prepared to substitute French wheat for Common wealth wheat.

Mr. Derek Page: Is my right hon. Friend aware that the cut in cereal prices does not appear to have resulted in any decrease in the acreage of cereals planted in Britain this year? The arrangements entered into by the previous Government do not appear to be working.

The Prime Minister: That is another question. When I met the National Farmers' Union in May it naturally expressed very strong feelings about the Price Review. This was understandable and understood. But I discussed with it the arrangements we may have for working out some increased agriculture programme in order to save imports.

Mr. Soames: Is the Prime Minister aware that the agreements to which he has referred were designed and intended to ensure that the increase in production which was called for by the increased consumption of cereals in this country would be of benefit to the farming industry, and that the agreement arrived at was agreed to both by the N.F.U. and by himself, when in Opposition—and that there is no earthly point in his endeavouring to call this in aid of the rotten Price Review?

The Prime Minister: This has nothing to do with the Price Review. It is certainly true that under these agreements there is an arrangement to provide that increasing consumption will be

shared between those from whom we import. So far as British production is concerned, so far as cereals are concerned, as I have said, we promised to take remedial action if the result of home production was to lead to a reduction in imports. What I cannot understand is why we were not permitted to increase British production in cereals while the right hon. Gentleman was prepared to see any amount of French wheat coming in and cutting out Commonwealth wheat coming in.

DEFENCE EXPENDITURE

Mr. Marten: asked the Prime Minister if he will now make a statement on the general reduction of military expenditure at home and overseas.

Mr. Frank Allaun: asked the Prime Minister if he will make a statement on his plans regarding reduction of arms expenditure.

The Prime Minister: No, Sir. The defence review is still in progress and there is nothing I can usefully say at this stage.

Mr. Marten: Could the Prime Minister kindly give an assurance that there will be no major changes announced in the defence policy during the Recess?

The Prime Minister: This review is inevitably a very thorough one and it is taking time. We certainly intend to make any announcement we have arising out of the defence review to the House, in full Session of the House.

Mr. Allaun: If we are to solve our pressing and inherited problems, can we afford the fantastic arms burden? Will the Prime Minister reconsider the recently declared aim of pegging arms to £2,000 million a year by 1970 at current prices? This means not a cut but an increase. Instead, would the Prime Minister slash the arms burden by a quarter?

The Prime Minister: I must make it clear to my hon. Friend that the decision that the defence programme should be restricted to £2,000 million at 1964 prices, means a substantial cut compared with the programmes that were already in force when we began our defence review


last October, because there was included in this programme an increase from about £2,000 million to something like £2,475 million at 1964 prices. I do not need to indicate to the House the enormous difficulties, in terms of our commitments, in terms of weapon programmes and the rest, of cutting the defence programme from £2,475 million to £2,000 million. I hope that my hon. Friend will not under-rate what an achievement this will be.

Mr. Soames: Particularly where the Territorial Army is concerned, there are rumours that the Government are proposing to announce their conclusions on the review of the functions and size of the Territorial Army before the end of July or early August. Would he please ensure that his right hon. Friend, if he is going to make such an announcement, should do so in plenty of time so that it may be debated, if necessary.

The Prime Minister: So far as any question arising out of the defence review is concerned, I can assure the right hon. Gentleman that as soon as we are in a position to make a statement we shall make a statement in this House, not elsewhere.

MINISTERS (TRADE UNION APPOINTMENTS)

Sir F. Bennett: asked the Prime Minister how many Ministers resigned trade union appointments on becoming Ministers last October; and how many still hold such appointments.

The Prime Minister: I would refer the hon. Member to the Answer I gave on 13th April to a Question by the right hon. Member for Guildford (Sir R Nugent).

Sir F. Bennett: I cannot recall that. I do not think it gave the numbers I have asked for. But will the Prime Minister realise that there is a genuine wish for him to show a new concern about the situation? Will he also realise that this is not just a Conservative vendetta, as was exemplified by 27 out of 28 resolutions at the Transport and General Workers Union conference recently; and they are not all members of the Tory Party, all taking the same view as we do on these benches?

The Prime Minister: I am sorry if the answer to which I referred, on 13th April, did not give the figures the hon. Member asked for. The figures given were the truth, whether they were the ones he asked for or not, and I hope he has studied them. As far as the resolutions of the Transport and General Workers Union conference are concerned, I think they showed the great desire of others who have worked with my right hon. Friend that his services should be available to them. So far as the Government are concerned, I am sure that after the last 48 hours pantomime, started by the hon. Member for Banbury (Mr. Marten), the whole House will agree that there is a paramount need for my right hon. Friend to stay in the Government and in the House.

SECRETARY OF STATE FOR ECONOMIC AFFAIRS (SPEECH)

Mr. Ian Gilmour: asked the Prime Minister whether the public speech made by the First Secretary of State and Secretary of State for Economic Affairs at the Lancashire miners' gala at Leigh on 12th June, 1965, about Her Majesty's Government's economic policies, represents the policy of Her Majesty's Government.

Sir F. Bennett: asked the Prime Minister whether the public speech made by the First Secretary of State and Secretary of State for Economic Affairs at the Lancashire miners' gala at Leigh on 12th June, 1965, about Her Majesty's Government's economic policies, represents the policy of Her Majesty's Government.

The Prime Minister: Yes, Sir.

Mr. Gilmour: Is the right hon. Gentleman aware that in his speech on 19th June the First Secretary alleged that there was a sinister conspiracy against the Government by the Press and the City? On 1st July the Prime Minister said there was not a conspiracy and, on 10th July, the noble Lord who is the Joint Under-Secretary for the Home Department said that there was a conspiracy. Is it the Government's view that the Press and the City are conspiring against them, or will the Prime Minister now repudiate the absurd fantasies of the First Secretary?

The Prime Minister: Having read the Spectator recently, I would think that


the hon. Gentleman knows better than I do whether there is any conspiracy between the proprietor and the editor of that paper. I would stand by the answer I gave on television, that I think there is enough original sin in parts of the Press that one does not need a conspiracy to have a vendetta.

Sir F. Bennett: Might I have the pleasure of congratulating the right hon. Gentleman on surviving so well the dinner he enjoyed last night with so many of the people whom his right hon. Friend described as conspirators? Can we hope that from this time on there will be rather less whining and trying to put the blame on other people's shoulders, and some acceptance of responsibility by the Government?

The Prime Minister: I had a very good dinner last night and I did not think that any question of survival arose. What I do find in the City and industry is that there is a very healthy disregard of the attempts of hon. Gentlemen opposite to involve the City and industry in antipatriotic moves.

NATIONAL ECONOMY

Mr. William Hamilton: asked the Prime Minister what plans he has for consultations with leaders of both sides of industry in the forthcoming months to discuss the state of the national economy, with particular reference to the inter-relationship of the problems of increased productivity, restrictive practices, and the balance of payments.

The Prime Minister: Such discussions are a normal and continuing part of the process of Government. No special plans are therefore necessary.

Mr. Hamilton: Would my right hon. Friend not consider the desirability of having a formal and well-publicised meeting between himself, in particular, and representatives of both sides of industry so that he might be able to come back to this House and make a progress report on the extent to which we are solving these problems which have been with us for so many years?

The Prime Minister: I think that the machinery which exists, particularly in relation to the Economic Development

Council and the individual economic development councils for individual industries, provides the best possible form of intimate consultation between Government and all sections of industry. But I think it may be necessary in the near future to get much more activity going on in consultation with those firms who have shown considerable efficiency in the home market but are not playing as full a part in the export markets as I think the national interests requires.

Sir Alec Douglas-Home: Arising out of this Question, will the Prime Minister realise that there is a great deal of public anxiety over a very wide range of labour relations? There is the failing incomes policy, the situation in the docks, the situation on the Southern Railways, all causing great anxiety to many hundreds of thousands of people. Will he himself take a personal interest in these deteriorating matters on the home front?

The Prime Minister: Yes, Sir, I have probably spent about 15 times as much time as the right hon. Gentleman did on all these economic questions. May I say I share his deep concern on some of the points he has mentioned, not least the question he raised in relation to the Southern Region services, to which my right hon. Friend referred yesterday. I certainly share that concern. So far as the incomes policy is concerned, I believe that we have made considerable progress in getting acceptance of an incomes policy. [Laughter.] Those who for 13 years failed and still titter at that reference are not part of the nation that the hon. Gentleman behind him was referring to. This is vitally important. Equally important, and I am sure the right hon. Gentleman will agree after his own experiences, is to get a much sharper cutting edge on to our exports and to get more of our manufacturers to venture in to the export markets.

Sir C. Osborne: While recognising that neither side of the House has a monopoly of patriotism, may I ask the Prime Minister whether he will look at a Question I have down to him about the export of shoes to Czechoslovakia which are lying in the docks in London and cannot be exported because dockers will not handle the goods? Will the right hon. Gentleman do his best to expedite that sort of work?

The Prime Minister: I am aware of the hon. Gentleman's Question, and again I share his concern. On the question of the docks referred to by the hon. Gentleman and the right hon. Member, I think we all feel that things are in a pretty dreadful mess there. This is why the Devlin Commission was appointed. [Interruption.] I wish hon. Members would treat these subjects with the seriousness that they deserve. The Devlin Commission was appointed, and we hope to have its report very soon. Although I do not know what will be in the report, knowing the problems there, I feel, as the hon. Gentleman does, that pretty fundamental solutions will be required in the docks. Let us wait for the Devlin Report and then we will make our proposals to the House.

BUSINESS OF THE HOUSE

Sir Alec Douglas-Home: May I ask the Leader of the House whether he will state the business of the House for next week?

The Lord President of the Council (Mr. Herbert Bowden): Yes, Sir, the business for next week will be as follows:
MONDAY, 19TH JULY and TUESDAY, 20TH JULY—Debate on Foreign Affairs, for which the Government will be making available a day and the Opposition a Supply day.
At the end on Monday, the Second Reading of the Public Works Loans Bill.
And, on Tuesday, the remaining stages of the Gas (Borrowing Powers) Bill, and consideration of Lords Amendments to the Gas Bill.
WEDNESDAY, 21ST JULY—Private Members' Motions until seven o'clock.
Afterwards, the remaining stages of the Redundancy Payments Bill.
THURSDAY, 22ND JULY—Supply [23rd Allotted Day]: Committee. Debate on the Deterioration in London's Commuter Transport Services, until seven o'clock, and afterwards on the State of the Post Office Services.
Remaining stages of the Judges Remuneration Bill, and Lords Amendments to the Firearms Bill and to the Statutory Orders (Special Procedure) Bill.
FRIDAY, 23RD JULY—Second Reading of the International Monetary Fund Bill and of the Patents (Employees' Inventions) Bill [Lords].
MONDAY, 26TH JULY—The proposed business will be: Supply [24th Allotted Day]: Committee.
Debate on Industry and Employment in Scotland.

Sir Alec Douglas-Home: Is the right hon. Gentleman aware that the statement, once again, shows a weekly programme which is appallingly congested? Is it not very wrong that the House should have to take after normal sitting hours, for instance, the Public Works Loans Bill, which concerns a matter on which there is usually a considerable debate, and, for instance, the Redundancy Payments Bill, which is a very important matter? Cannot the Leader of the House reconsider this programme?

Mr. Bowden: I accept at once that there is every year at this stage of the year a rather heavy overloading of the Order Paper and of the business of the House. The House has to make up its mind. My endeavour, as Leader of the House, is to get the House up at the end of the first week in August. It is for the House to decide. If the House—both sides—wishes to take things more leisurely, we can go into the second week. [HON. MEMBERS: "Hear, hear."] If that is the House's wish, we can discuss it through the usual channels.
On the question of the overloading, I ask the Leader of the Opposition to look at the 1960–61 Session. We have not yet reached that high number of hours worked after 10.30. Perhaps the right hon. Gentleman will be good enough to look at that.

Mr. Grimond: Will the Leader of the House ensure through his right hon. Friend the Secretary of State for Commonwealth Relations that a statement on the negotiations on Rhodesia is made before we rise? Is he aware that no one wants to sit into August but that it would cause profound disquiet if any decisions contrary to those already outlined about Rhodesia were taken after the House rose?

Mr. Bowden: I will certainly consult my right hon. Friend on the question


of a statement on Rhodesia. I should not like the House to be misled: we are already sitting into August. I was referring to the second week in August.

Mr. Richard: May I convey to the Leader of the House the fact that there are a large number of Members on this side of the House, at any rate, who are quite prepared to sit into the second week of August and who would be only too delighted to appear in the House on the 12th?

Mr. Boyd-Carpenter: Will not the right hon. Gentleman reconsider the programme for the Public Works Loans Bill? It raises major questions of local government finance which are of great interest to hon. Members on both sides of the House. Will he recall the protests which his hon. Friends made when, some years ago, discussion of a Bill authorising about half this amount of money was allowed to begin an hour earlier?

Mr. Bowden: I am prepared to consider this through the usual channels. The right hon. Gentleman's remarks will be taken into consideration. I remind the House again, however, that we have to take a considerable amount of business after ten o'clock if hon. Members want to adjourn during the first week of August.

Mr. William Hamilton: First, can my right hon. Friend say when the Report of the Committee of Privileges will be available and whether time will be provided for a debate on it? Secondly, would he consider again as an alternative to sitting either in the second week in August or having a congested programme, as the Leader of the Opposition suggested, having some more morning sittings to debate these matters? There is a large volume of opinion among Members on this side of the House wholly in favour of that course being taken.

Mr. Bowden: On the first point, the Report of the Committee of Privileges was available at eleven o'clock this morning.
If it is the view of the House that we should have morning sittings to complete this part of the Session rather than sit into the second week in August, I am prepared to consider it. I would remind the House, however, that that would need

a decision of the House, which itself would take a day's debate.

Mr. Gower: Can the right hon. Gentleman say whether the Bill promised about the setting up of a Lands Commission, the Bill promised to deal with leasehold reform and the Bill promised to deal with the provision of rather cheaper mortgages, will all be deferred to a future Session?

Mr. Bowden: No, Sir, I cannot confirm that at this stage. What I can say is that they will not be taken before the Summer Recess.

Mr. Shinwell: Would my right hon. Friend have consultations through the usual channels about the desirability and practicability of having some morning sittings rather than have hon. Members sitting through the night? We are not suggesting that we should have morning sittings regularly, but surely to have some would be preferable to sitting through the night and meeting in the second week in August. Would my right hon. Friend discuss the matter through the usual channels?

Mr. Bowden: Yes. This seems to be a reasonable arrangement. Perhaps we could discuss it through the usual channels. If we could reach an agreement and not waste a day debating it, we should save some time.

Mr. Godber: May I remind the right hon. Gentleman that last night I and some of my hon. Friends wished to debate Prayers which could not be taken because of Government business, which went on until a late hour? May I also remind him of the need to take these Prayers, particularly in view of the fact that in the winding-up speech in the debate on technology last night the Joint Parliamentary Secretary to the Ministry of Labour made remarks about those Prayers which were wholly misleading and which he knew to be misleading?

Mr. Bowden: I will have to see how many days are left for the Prayers. There are usually 40 praying days. I would have hoped that they would be put down early enough to have been taken sooner.

Mr. Zilliacus: In view of the number of times that the Government have, quite rightly, suspended the ten o'clock rule


to provide the necessary time for getting through Bills, will my right hon. Friend apply the same principle to the two-day foreign affairs debate and extend the debate on each of these days to, say, midnight, since we have not had a foreign affairs debate for a very long time, and a tremendous number of issues have arisen on which a great many hon. Members would like to say a few words?

Mr. Bowden: I will do what the House wishes in this matter, but I would not do it lightly. My views from experience is that two days on a foreign affairs debate is enough. I should have thought that if speeches were, perhaps, curtailed to 15 or 20 minutes, we might overcome the difficulty.

Mr. Soames: Will the right hon. Gentleman kindly represent to his right hon. Friend the Minister of Defence, because when I put it to the Prime Minister at Question Time I think that he must have misheard me, that if he is making a statement on the future of the Territorial Army before the Recess we would like him to do so in time so that, if necessary, there may be a debate upon it?

Mr. Bowden: I think that the right hon. Gentleman misheard my right hon. Friend the Prime Minister. I was sitting next to him and I heard this. It is, I think, clear that if a statement is to be made, it will be made in the House.

Mr. Woodburn: Further to the question by my right hon. Friend the Member for Easington (Mr. Shinwell), when the discussions take place through the usual channel, will my right hon. Friend the Leader of the House consider, in connection with the long hours, the strain on the staff, including those who have to make travel arrangements for Members of Parliament? It is impossible at this time of the year, when there is holiday traffic, for them to change trains and aircraft bookings at the whim of the different sides of the House. The usual channels should come to a sensible agreement that makes it possible for people to book trains and aircraft in a businesslike fashion.

Mr. Bowden: Yes, Sir, I am very well aware of the inconvenience to the staff of the House in sitting into the first week

of August, and I have been trying to obviate sitting into the second week. I should have thought that despite the cheers which I got from both sides of the House a few moments ago, it would be the general wish of the House to get up at the end of the first week of August if possible.

Mr. Gibson-Watt: Will the right hon. Gentleman consider the request that I made to him a week ago that we should have a day for Welsh affairs on the Floor of the House? Will time for this be found before we rise for the Recess? If not, can it be explained why the Prime Minister said that there would be more time for the discussion of Welsh affairs on the Floor of the House during this Session?

Mr. Bowden: There is normally a day's debate on the Floor of the House on Welsh affairs in addition to the days upstairs in the Welsh Grand Committee. We shall have that day in the present Session of Parliament—I hope, although I cannot promise it firmly, before the House rises before the Recess.

Mr. Snow: Following my right hon. Friend's suggestion that there might be conversations through the usual channels about morning sittings, may I ask that if such conservations take place consideration will be given to the further proceedings on the Judges' Remuneration Bill, about which some hon. Members have misgivings?

Mr. Bowden: This is all part of the remaining stages of the Bills which we hope to get through before the House rises.

Mr. A. Royle: Has the right hon. Gentleman seen Motion No. 316 on the Order Paper, tabled by my hon. Friend the Member for Brentford and Chiswick (Mr. Dudley Smith) and myself and a number of others of my hon. Friends, about the state of the London bus services and the deterioration of the service over the past few weeks?
Will there be any possibility of debating this Motion during the coming week?

[That this House views with concern the inconvenience caused to the public of the Greater London area through the continued deterioration of London Transport bus services and urges the Minister


of Transport, in view of past promises for more efficient working made by management and staff, which have not been fulfilled, to examine the planning and administration of such services as part of his announced inquiry into London Transport's financial structure.]

Mr. Bowden: I do not expect any opportunity of debating the Motion unless it is done on a private Member's or Adjournment debate, or is picked up by the official Opposition. The question of the deterioration of London bus services is not a matter of the last few weeks. It has probably been going on for a considerable time. The Government are, however, looking at the position and are doing what is possible to help.

Several Hon. Members: rose—

Mr. Speaker: We must pass on now. The Prime Minister.

MR. ADLAI STEVENSON

The Prime Minister (Mr. Harold Wilson): Before making the statement which I think the House expects me to make about my hon. Friend's visit to Hanoi, I am sure that the House would wish me to express the deep sense of shock everyone of us felt when we heard the sad news last night of the death of Adlai Stevenson.
A number of us here were privileged to regard him as a personal friend, and those of us who were able to meet and talk with him on this, his last visit to London, perhaps find it most difficult to find words to express what his sudden passing means to us. He was a great friend of this country, but more than that—and this phrase has been on the lips of so many in these hours—he was a citizen of the world.
Deeply civilised, a standard-bearer of liberal, humane ideals, a master of the spoken word, with a wit which is memorable equally for its penetration as for its complete innocence of malice, above all a statesman dedicated to a great vision of the new world he laboured so devotedly to create, Adlai Stevenson will be missed here in Britain, in the Commonwealth, and more widely, just as sadly as in his sorrowing homeland where he is so deeply mourned today.

Hon. Members: Hear, hear.

Sir Alec Douglas-Home: May I associate this side of the House with everything that the Prime Minister has said of Mr. Adlai Stevenson and send our sympathy to the people of the United States who have suffered this great loss?
I had the privilege of working over a number of years with Mr. Adlai Stevenson while he was at the United Nations. There his great qualities of sincerity, advocacy and humanity were at their best and found their fullest scope. He was one of the staunchest defenders of the rights of free men everywhere and yet he never lost any opportunity of promoting harmony and tolerance among men. Therefore, he will be widely mourned not only in the United States, his homeland, but in this country and far further afield.

Mr. J. Grimond: May we, too, be associated in the tributes to Adlai Stevenson? Some people looked upon him as a charming orator, but not as a wholly successful politician. I think that they were wrong. He was a most effective Governor of Illinois, a man who showed that it might be possible to marry idealism to skill for the solution of the world's problems. He certainly had a capacity to refresh old ideas and communicate them anew. His 1952 and 1956 presidential campaigns raised the standard of political discussion all over the free world. We certainly mourn with America in her sudden and tragic loss through the premature death of Adlai Stevenson.

VIETNAM (PARLIAMENTARY SECRETARY'S VISIT TO HANOI)

The Prime Minister (Mr. Harold Wilson): With permission, Mr. Speaker, I wish to make a statement.
My hon. Friend the Member for Leek (Mr. Harold Davies), Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance returned from Hanoi yesterday and he has given my right hon. Friend the Foreign Secretary and myself a full report on his discussions there. As the House is aware, my hon. Friend was unable to see any North Vietnamese Ministers or to obtain any undertaking that the Commonwealth Mission would be received in Hanoi. Nevertheless, during his five-day stay he


was able to impress on the officials of the Fatherland Front and the Ministry of Foreign Affairs, with whom he had protracted conversations, the views of Her. Majesty's Government and of the Commonwealth Mission. My hon. Friend tells me that copious notes were taken throughout these meetings and I have no doubt that the arguments which my hon. Friend urged with all his accustomed fluency and persistence will be passed on to the leaders of North Vietnam.
In presenting his arguments in favour of receiving the Commonwealth Mission, my hon. Friend had to struggle against the evident conviction on the part of his North Vietnamese hearers that their prospects of victory were too imminent for it to be worth their while to forsake the battlefield for the conference table. In such an atmosphere it is scarcely surprising that he was unable to bring back any word of encouragement, but I am extremely glad that the arguments, which are not only our arguments but those of the Commonwealth and of much of the world, in favour of peace and negotiations, should at last, and for the first time, have been fully and faithfully expounded to the North Vietnamese in the artificial isolation of their own capital. They may not have exerted an immediate and visible effect, but I believe that the passage of time will reinforce them and that there will be a general recognition of what I believe to be self-evident, that the Vietnam problem will not be solved by military means alone.
As soon as this occurs, as soon as the North Vietnamese are ready to receive the Commonwealth Mission, or as soon as they are prepared to facilitate the reconvening of the Geneva Conference, then, I believe, we shall be on the way to the political solution which alone can bring the fighting to an end. I believe that my hon. Friend has contributed in no small measure to advancing the day when all the parties concerned can get round a table to reach agreement on such a solution.

Mr. Maudling: It appears that in this matter the Prime Minister has been less than frank with the House. For instance, is it not true, as reported in The Times, that when he told the House on Monday about the possibility of the Joint Parlia-

mentary Secretary seeing Ho Chi Minh, he had already authorised his return to this country because his mission was abortive?
Secondly, is it not a fact that so far from contributing to the possibility of peace in South-East Asia, this humiliating rebuff to a British Minister, for it is nothing less—[HON. MEMBERS: "Withdraw."] I shall not—has made it more difficult for the Government to contribute to the cause of peace?

The Prime Minister: The right hon. Gentleman, who, on Monday, was keen on this mission, and who, last week, was supporting it—[HON. MEMBERS: "Answer the question."] I shall—had better make up his mind which foot he is standing on.

Mr. William Hamilton: On Sir Alec's, I think.

The Prime Minister: I shall deal, first, with the right hon. Gentleman's question about timing. On Monday morning, having already told my hon. Friend that he should stay just as long as he felt it was right to do so in order to make his mission as useful as could be, I received a message from him saying that he felt It was time to return home, and asking for my agreement to that. I gave him that agreement, but just as I was coming into the Chamber I received a telegram—which the right hon. Gentleman can see if he wishes—saying that the plane which was due to pick him up had been turned back for the reason that I mentioned on Monday. In those circumstances, I naturally could not tell the House exactly when he would come back. We had expected him to come back on Tuesday.

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Harold Davies): That is the truth.

The Prime Minister: My hon. Friend should know more about this than the right hon. Gentleman. As long as my hon. Friend was able to stay there, it was natural that he should make use of his time, and he still had not received a reply to his letter to the Prime Minister of North Vietnam asking to see him. So much for that question.
The right hon. Gentleman now says that this visit has harmed the cause of


peace. He refers to it as a rebuff. What I want to be clear about is what he felt we should have done. Should we not have sent an emissary to Hanoi? Is that what he is saying? [HON. MEMBERS: "Answer."] The right hon. Gentleman the Leader of the Opposition accused my right hon. Friend the Foreign Secretary of falling into Communist trap. What claptrap this is! What we did achieve—not as much as we hoped for—was that for 16 hours my hon. Friend was able to urge the position which we have taken up in the House and which the Commonwealth has taken up on the North Vietnamese question.
Was this not worth doing? The right hon. Gentleman, who says that we should do it through diplomatic channels, had better get up at some time and explain how we could have diplomatic connections with Hanoi at a time when we do not recognise the North Vietnamese? This was the only chance, not only on behalf of Britain but of other Western countries, to get a voice in Hanoi, and the right hon. Gentleman's view on this is not the view of our colleagues in the Commonwealth, nor is it the view of the United States.

Mr. Maudling: But will the Prime Minister answer my question? When he made his statement on Monday, had he authorised the return of the Joint Parliamentary Secretary, which he did not tell us at the time, and why did he not tell us? Secondly, is it not a humiliating rebuff when a British Minister cannot even see the Minister of another Government?

The Prime Minister: The mere fact that I told the right hon. Gentleman that the plane was due to bring my hon. Friend back on Tuesday was an obvious statement to the House that he was due to come back on Tuesday. I do not know what the right hon. Gentleman is asking about. I said that the plane on which my hon. Friend was due to travel on Tuesday—surely a clear statement that he was due to come back, and I had authorised his return—had been turned back. I did not know for how long it would be turned back. Therefore, I did not know when he was coming.
As regards the rebuff to which the right hon. Gentleman has referred, if anyone here is to try to play the part

which I believe we can play to get peace, he has to be prepared to accept rebuffs. I said this last Thursday. I would rather have rebuffs than the attitude of right hon. Gentlemen opposite, who would be prepared to let this war go on for another two years without making any effort. The right hon. Gentleman knows that through every diplomatic channel we have made the effort that we could with the Russians month after month, as has my right hon. Friend the Foreign Secretary. But we have no diplomatic relations with Hanoi. Can I get that into the right hon. Gentleman's head? He does not understand it.
If we do not have that diplomatic relation, the right hon. Gentleman still has to tell us how we could have taken any initiative at all. Let the right hon. Gentleman say clearly how the Opposition would have started any kind of negotiations with Hanoi. We did it by sending my hon. Friend. The Opposition have no answer. If the right hon. Gentleman is to talk about rebuffs and humiliation, I am surprised that he should do so in the presence of his right hon. Friend the Member for Bexley (Mr. Heath), after his experience in Brussels two years ago.

Mr. Grimond: Have the Government of North Vietnam definitely and once again refused to see the Commonwealth Mission?

The Prime Minister: Yes, Sir. They indicated to my hon. Friend that they could not go beyond what they had said in a public statement about their unwillingness to receive the Mission and they explained the reason for it to my hon. Friend.

Hon. Members: Who?

Sir Kenneth Pickthorn: rose—

Hon. Members: Sit down.

The Prime Minister: This is a twentieth century war about which we are talking.

Hon. Members: Cheap.

The Prime Minister: One of the difficulties that my hon. Friend found was that, as the North Vietnamese said quite clearly, it was difficult for them, having announced that they would not receive


the Mission, in their discussions with my hon. Friend to go beyond what their own publicity had said; and if I may express a view, with which I am sure my hon. Friend will agree, nothing did more harm to his mission, despite the fact that I think it was useful, than the leak in this country, and the wave of publicity on the very eve of his arrival in Hanoi.

Mr. Peter Thomas: Is it not a fact that the Prime Minister told the House last Monday that he did not know whether his hon. Friend would be seeing Ho Chi Minh, when, in fact, the right hon. Gentleman knew that his hon. Friend would be unable to see him, and, in fact, that it was his hon. Friend's view that the mission was abortive?
Secondly, is the Prime Minister aware that some of us on this side of the House, and, indeed, many people in the country, are concerned that a Government who have publicly proclaimed a particular point of view were represented at Hanoi by someone who has consistently supported an opposite view?

The Prime Minister: The right hon. Gentleman will no doubt have time afterwards to consider whether he thinks that that remark was worthy of him. I do not think that it was. [HON. MEMBERS: "It is true."] The phrase that we had last week was that my hon. Friend would be brainwashed by the North Vietnamese. Having seen the full notes of 16 hours of discussions, let me say that it was my hon. Friend who brainwashed them, as anyone who knows him would expect.
I must deal with the right hon. and learned Gentleman's first question. When I spoke on Monday, it was by no means clear that my hon. Friend would not see either the President or the Prime Minister.

Mr. Harold Davies: Hear, hear.

The Prime Minister: My hon. Friend knows, and I know this. I have offered to show the right hon. Gentleman the telegram. My hon. Friend had been promised that he would see him. [HON. MEMBERS: "By whom?"] Promised by the people to whom he was talking in North Vietnam. [HON. MEMBERS: "Who were they?"] Representatives of the

Ministry of Foreign Affairs—[Interruption.]

Mr. Speaker: Order. The House is being rather unwise. I am allowed to permit only a limited number of questions on a statement and the more noise there is, from one side or the other, the more it reduces the possibility of my allowing any questions.

The Prime Minister: In a letter, as well as verbally, my hon. Friend had asked to see Mr. Pham Van Dong. This happened on the Saturday. He sent a telegram to me which arrived on Monday and said that his plane was due to pick him up on Tuesday and saying that he thought that he should return if they had not seen him by that time. I authorised him to return.
As I have said, just as I was coming into the Chamber I was told that the plane was delayed, which might have meant—in fact, it did not—delayed for another day. From the time he communicated with me—my hon. Friend probably sent the telegram on Sunday night—my hon. Friend still had hopes that in the day and a half left of his visit he would see Pham Van Dong. We had no information that he would not be seeing him, but we had, on the other hand, a contingent promise that he would.

Mr. Sydney Silverman: Will my right hon. Friend bear in mind that all of us on this side of the House, including many who have been critical of some earlier aspects of Government policy, congratulate him on the initiative which he has recently taken and appreciate that it was a valiant attempt to get negotiations going and believe that a step forward has been made in a constructive sense?
On the issue of diplomatic relations with North Vietnam, is not the basis of the negotiations that there is, in fact, an authority which exercises real authority in North Vietnam and does not this establish the basis of de facto recognition which might permit diplomatic negotiations to take place?

The Prime Minister: Of course, we do not recognise the authorities in North Vietnam. That is why our consular post there is not a diplomatic channel through


which we can approach the North Vietnamese authorities. That is why unconventional methods have to be used if we are to say anything to them. I still believe that it was extremely valuable that for the first time someone from the West, expressing the Government point of view, was able to express in North Vietnam the views which my hon. Friend was able to express there. I thank my hon. Friend for what he said at the beginning of his question.
This matter leaves me with the position whether right hon. and hon. Gentlemen opposite are not anxious to take every step available to peace, or whether their resentment is due to the fact that they are not there themselves to take those steps.

Mr. Soames: The Prime Minister appears to be somewhat surprised that the North Vietnam Government did not see his hon. Friend. Can he tell us what it was that led him to believe that the North Vietnam Government, which had already refused to see him, would receive his hon. Friend?

The Prime Minister: The North Vietnam Government had not given any of us any reply at a Government-to-Government level to the request that the Commonwealth Mission should see it. There was still some doubt on that question. [HON. MEMBERS: "What about Gordon Walker?"] The question was about the Commonwealth Mission and not about Mr. Gordon Walker. Indeed, regret was expressed to my hon. Friend that they had not received Mr. Gordon Walker.
So far as the Commonwealth Peace Mission is concerned: the mere fact that we did not have diplomatic relations with the North Vietnam Government meant that it did not receive the message handed to it by Her Majesty's Consul-General. Equally, an earlier American message sent through Her Majesty's Consul-General was returned because of the absence of diplomatic relations.
In these circumstances, I believe that we were right to try any method to try to get to them. We thought that my hon. Friend would be received because he had been told in London, on the authority of the North Vietnamese authorities, that he would be received by their Ministers. I believe that the reason he was not received was that when he got there he

spoke so toughly in support of the line we have taken that they decided that there was nothing to talk about.

Mr. A. Henderson: Will my right hon. Friend assure us that he will not be diverted by the querrulous and niggling criticisms of the Opposition from continuing his efforts to bring about talks or negotiations with a view to bringing an end to the terrible conflict in Vietnam?

The Prime Minister: The answer to that is that we shall not be diverted by this kind of thing. Indeed, other measures are already going ahead to try to get a dialogue with those responsible. [HON. MEMBERS: "What is the difference?"] The difference is that we on this side of the House believe that this is a dangerous war and want to bring it to an end, and are prepared to take rebuffs in the course of this. Knowing that there is, no diplomatic channel, right hon. Gentlemen opposite say that we should not take any action at all. They and Chou En-lai have a lot in common.

Sir Alec Douglas-Home: In view of the Prime Minister's remark a few moments ago, perhaps he will allow me to say, and perhaps he will accept, that we on this side of the House will always support any genuinely conceived initiative which will further the cause of peace. I would have thought that the right hon. Gentleman and his right hon. Friends would be the last to complain of the support we have given him for his policy on Vietnam.
May I just take this a little further? While we will always give this support in the case of a genuine initiative, as the Opposition it is our duty, if we think that an initiative is ill-conceived and doomed to failure from the start and will, therefore, prejudice an initiative in future which could be properly timed and have real impact, to say so.

The Prime Minister: If the right hon. Gentleman says that it was ill-conceived and that we were wrong to try this, he has a duty to say that as well. That was not his position last Thursday. Last Thursday his chief concern was to see whether we had got the permission of the Americans. I can now tell him that this was most warmly received by the American Government, not only in private but in public. There was a public statement to that effect. I am able to


say that we were in the closest connection with them while my hon. Friend was there—and that was the only point which the right hon. Gentleman made last week. On Sunday, he said that the Foreign Secretary had fallen into a Communist trap. This really is a return to the old stuff which we used to get from him—Communists under the bed all the time.
But the right hon. Gentleman has another duty as the Leader of an alternative Government. It is to say whether he would take initiatives in this situation, recognising that Hanoi is the key, and whether he would take initiatives to have a dialogue with Hanoi. We have had no answer to that question from him.

Sir Alec Douglas-Home: rose—

Mr. Speaker: I think that we have had enough of this—[HON. MEMBERS: "Oh."] I point out only that we have business to do and that the House will, I hope, have an opportunity to probe these matters further next week. However, if the Leader of the Opposition desires to ask one more question, I will permit it.

Sir Alec Douglas-Home: Perhaps it would be better—

Mr. Shinwell: On a point of order. [HON. MEMBERS: "Sit down."] I will not sit down for you.

Mr. Speaker: Order. I hope that there will not be any undue din, because it might become hot. At present, I am trying to hear a point of order addressed to me by the right hon. Member for Easington (Mr. Shinwell).

Mr. Shinwell: I will sit down for you, Mr. Speaker, but not for any hon. Member opposite. With great respect, that is all I was saying.
My point of order is that I understood you to rise a moment ago when you intended to put an end to the questions and answers on this subject. Will you be good enough to say why you are allowing the right hon. Gentleman the Leader of the Opposition to put another question?

Mr. Speaker: I am sorry, but I do not feel disposed to submit to cross-examination. I think that, if the right hon. Gentleman refers to the last words used

by the Prime Minister—it is difficult to carry these things in one's head—he will understand that anyone would have thought it proper in the circumstances to allow one more question from one individual. That is what I am doing.

Sir Alec Douglas-Home: I think that it would, perhaps, be better if we returned to this in the debate on foreign affairs on Monday. I have just one question to put to the right hon. Gentleman on a very important factor in this situation. Apparently, the co-chairman-ship with Mr. Gromyko has been allowed to lapse over the last year. Will he try to ensure that it is revived?

The Prime Minister: The right hon. Gentleman is about six months behind the times in that question, if I may say so. I have reported many times to the House that, although there was a period during the winter when it appeared that the Soviet Government considered that the co-chairmanship was no longer operative, this had completely changed again in the spring.
I have reported this to the House—[Interruption.] Yes, in respect of the whole of Indo-China—and my right hon. Friend the Foreign Secretary had a week of consistent talks with Mr. Gromyko on this when Mr. Gromyko was in London. I could not count the number of times—I shall look it up—that we have raised with Mr. Gromyko the question of activating, through the two co-chairmen, the 1954 conference. The Soviet Government raised with us the question of calling a Cambodia conference, proving that the co-chairmanship is active, and very recently my right hon. Friend has raised it again with Mr. Gromyko.
I said in my statement on Monday, and I said again last Thursday, that I hope that any question of discussion with Hanoi will lead to reactivation of this conference by the two co-chairmen, but Russia will not move without a move on the part of Hanoi. I hope that the right hon. Gentleman the Leader of the Opposition will, in the debate next week, tell us how he would have got things started in Hanoi without diplomatic recognition if not by the means which we have used.

Several Hon. Members: rose—

Mr. Speaker: We must pass on now. Does the hon. Member for Orpington (Mr. Lubbock) wish to raise a matter?

RAILWAYS (SOUTHERN REGION SERVICES)

Mr. Lubbock: Mr. Speaker, I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a definite matter of urgent public importance, namely,
the suspension of certain rail services on the Southern Region tomorrow.
I submit, first, that this is a definite matter, and I quote from the tape:
S.R. drivers to strike. More than 60 train drivers at Ramsgate and Margate depot are certain to strike tomorrow. A Thanet official of the Associated Society of Locomotive Engineers and Firemen said today, 'A strike is definitely on and I think we shall have the support of all our members'.
I submit, secondly, that the matter is urgent because this is the only opportunity the House will have to discuss it before the disruption of the services which will be caused by the strike.
I submit, thirdly, that there is no doubt that the matter is of great public importance. The Prime Minister has already expressed his deep concern at Question Time, and, if this strike goes ahead, hundreds of thousands of people will find it impossible to get to work, with very serious consequences for the economic life of the nation. I need hardly underline that the go-slow has already cost this nation, probably, hundreds of thousands of pounds.

Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a definite matter of urgent public importance, namely,
the suspension of certain rail services on the Southern Region tomorrow.
I am not in a position to leave this to the House. I have had to rule on the precise point myself, in February, 1960, I think. It is not within the Standing Order.

Orders of the Day — FINANCE (No. 2) BILL

Order for Third Reading read.

4.14 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move, That the Bill be now read the Third time.
I am sure that the whole House will rejoice with me that the Motion means that this is the last speech I shall make on this Finance Bill. There are two outstanding and much overdue reforms in the Bill, first, the Capital Gains Tax, second, the Corporation Tax. There are many other matters in the Bill but, as these two are the outstanding ones and as it is my desire not to detain the House long because of the number of my hon. Friends who, I am sure, wish to speak, I shall deal only with those two taxes.
The Capital Gains Tax and the Corporation Tax are closely related in many ways. Those who have suggested that we might have brought in one this year, whichever one it might be, and the other the following year are greatly mistaken. Obviously, they have not had the opportunity to consider the close interrelationship and interaction between these two taxes. Any Government who wanted a thorough-going reform in either of these two fields would, naturally, wish to introduce both taxes. Certainly, any Government introducing a reform of the tax on companies in the form of Corporation Tax would undoubtedly wish, at the same time, to introduce a Capital Gains Tax.
The justification for the Capital Gains Tax is that of equity and justice. Most people in this country, whatever they spend, spend out of a fund of taxed income. There are a select few who, when they spend, spend money out of an untaxed fund. It is as simple as that, and what the Capital Gains Tax does is to ensure that those who spend money, by realising gains on their capital, spend it out of a taxed fund. We believe that it is wholly unjust and unfair that the small man who has to pay tax on every penny which reaches his pocket before he spends it, should be in a different position from his wealthier neighbour who has not had to pay tax


on his capital gains. However, it is a modest tax and it is introduced at a moderate rate.
There have been many misunderstandings about the tax, and I shall remind the House of the extent to which certain capital gains are exempt and remove one or two major misunderstandings which are continually being repeated outside the House. The Capital Gains Tax does not apply to the home of an owner-occupier. He can sell his house and buy another and not pay any Capital Gains Tax. National Savings in the form of National Savings Certificates, Premium Bonds, Defence Bonds and National Development Bonds are all exempt from the Capital Gains Tax. Any chattels which are sold or disposed of for £1,000 or less are free of Capital Gains Tax. Life assurance policies are not subject to the Capital Gains Tax and neither are wholly approved superannuation funds. Moreover, the first £5,000 of gains arising on death are free of Capital Gains Tax.
I should add here that I am talking about gains. The idea has got about in some quarters that the first £5,000 of property is exempt from Capital Gains Tax. No property as such is subject to the Capital Gains Tax. Only the gain is subject to the Capital Gains Tax, and I repeat that the first £5,000 of gain arising on a death is free of Capital Gains Tax. There is further relief for the transfer of a business on retirement, a substantial relief with exemption for the first £10,000 of gains at the age of 65 or over, tapering to £2,000 at the age of 61.
These are major exemptions, and it is right that the small man in particular should realise that the burden of the Capital Gains Tax does not rest upon him. Moreover, there is no retrospection. The gain is a gain calculated from Budget day, or, if the gain is less when calculated from the date of original purchase, the lower figure is taken into account.
I shall give the House one or two figures to show where the weight of the tax is likely to fall. We estimate that only 10 per cent. of individuals will be liable at the full rate of Capital Gains Tax, namely, 30 per cent. As the House knows, there is the full rate of 30 per cent., and then an alterative basis which means a much reduced rate in a variety of cases. Those who bear the 30 per cent.

rate will have to pay about 58 per cent. of the tax. In other words, more than half the tax will fall on those whose circumstances are such that they bear the 30 per cent. rate. In numbers of people they represent only 10 per cent. of all the individuals who will be called upon to pay the tax.
As for those liable on the alternative basis, the standard rate and Surtax payers, who get some relief, will pay about 40 per cent. of the tax. Those who pay at less than the standard rate, who may be described as small men, will have to bear between them no more than 2 per cent. of this tax. I therefore hope that I have made it clear that though this tax is modest, though the amounts to be collected in the earlier years are modest in the extreme, even so, as a result of the alternative basis of assessment, only 2 per cent. of the tax will fall on the shoulders of the small man.

Mr. Stratton Mills: We are very grateful for these interesting figures. But how is it possible for the right hon. Gentleman to make this calculation in advance with such great certainty as he appears to be showing?

Mr. Diamond: The answer is that which I have given on many previous occasions. We are well served by a Department which includes a vast number of statisticians whose job it is to be prepared to give this kind of information to the House. Whenever an Amendment is moved, the first thing an hon. Member wants to know is what will be the cost. Anybody at this Box who cannot answer that question, or give an explanation for the lack of an answer, is naturally susceptible to criticism. This is the best estimate which we can make, and I give it to the House in good faith believing it to be reliable. This is the modest contribution which the Capital Gains Tax will make to a developing system of greater justice.
The second tax is the Corporation Tax, here again a much overdue reform. It deals in one stroke with a number of socially and economically desirable objectives. Above all, it encourages growth and efficiency by encouraging institutions to plough back, to use the technical term, and by encouraging the developer as against the hoarder. It also improves the tax structure in a number of ways. It


achieves the modernisation which was attempted by two previous Conservative Chancellors of the Exchequer, but without any success.
It achieves a great simplification of the system. For the first time the businessman will be able to understand what his tax liability will be in approximate terms. Up to the present no businessman could look at his accounts and say, "I have made so much profit. I am, therefore, likely to be called upon to pay so much tax". The Government are a partner with every entrepreneur, and yet the entrepreneur cannot say to what extent the partnership applies, whether one may be a senior partner, a junior partner, or a very important partner.
The hon. Member for Louth (Sir C. Osborne), who is a knowledgeable businessman, will admit immediately that he could never say about any one of his many companies, looking at his profits, or being told what his profits are month by month, what the tax is likely to be. He pays his Income Tax in respect of one period. It may be an odd period, it may be some time ago and it may have no relation to the current profits. He pays Profits Tax on the basis of a different period. He is permitted all sorts of allowances—capital allowances and other allowances. It is quite impossible for him to know what the tax will be.
Under the new tax system, all he has to do is to look at the accounts, to see what the profits are, whatever the accounting period, to make a rough calculation of 35 per cent. or 40 per cent—and he has the approximate answer straight away. For the first time he is brought into the full realisation of the extent of his partnership with the State, as a result of the great simplification introduced in the structure by this Corporation Tax. It also achieves great flexibility by enabling the Corporation Tax burden to be adjusted without the individual tax burden being adjusted. In that respect, it is an essential ingredient of the Government's incomes policy.
It also removes many anomalies which have been mentioned in the debate, especially that dealing with the "repayment" of tax where no tax has been borne. It will effect a tremendous reduction in tax avoidance, especially with regard to the opening and closing years of a business.

In terms of structure, therefore, it is a great advance.
But the greatest argument in favour of the Corporation Tax is that of efficiency and growth. We maintain that it is a great encouragement to efficiency and growth. It achieves this by levying a tax on the profits of a company separate from the tax on the shareholders and levying a tax which, at the rate of 35 per cent., for example, would mean that at that point in time the company would have approximately 50 per cent. more resources left out of its current year's profits available for growth and development than it would have under the present system at that point of time.
This is a tremendous encouragement for the retention of profits with companies to the largest possible extent in order to obtain fresh capital for development purposes. Out of that source they are able to develop and to buy new plant and machinery. I gave figures earlier, and I have given detailed figures to the right hon. Gentleman.
This proposition has been challenged not so much on the question whether what I have said is broadly true, but on the argument that this leaves a large balance which is not accounted for; and it is suggested that this balance is made up of money coming from shareholders who receive their dividends and reinvest them immediately. This is the picture put before us. We are told that it is wrong to discourage distribution in this way, because if we distribute we give the shareholders an income, and they receive their income and put it in a bank account carefully labelled, "Dividends". Not to be touched under any circumstances. Not to be spent but only to be reinvested". We are told that they reinvest that income in other companies.
This is completely untrue. Companies do not get their funds from the market in this way. They get their funds either from ploughed-back profits or, from the market, broadly and to the greatest possible extent from institutional savings which come from the small man.
I recommend to hon. Members the June, 1965, Quarterly Bulletin of the Bank of England, from which it will be seen, looking at the personal sector as a whole, that the investment in equity shares has gone down in each of the last


two years, 1963 and 1964, by about £450 million. That represents dis-saving in the personal sector which is counterbalanced by the additional investment of contractual savings coming from life assurance, pension funds and unit trusts of about £500 million each year. That is what is happening. The nature of the shareholders is changing. They are ceasing to be individuals to the extent of £450 million a year, and they are becoming contractual institutional savers to the extent of about £500 million a year. These savings do not come from dividends or share owners but, by and large, from the small man who saves out of his salary in pension funds or life insurance premiums. That is where the savings come from.
It is, therefore, clear that there is no argument whatever to support the view that we should encourage plough-back and investment by companies by distributing dividends so that the shareholders, on receipt of their dividends, can reinvest them. They do not reinvest them. They spend them. Not only do they spend their dividends, but they spend their shares to the extent of £450 million; or, at least, they take them out of the companies and use them in other ways, or spend them. I repeat, therefore, that it is absolutely clear that the best way to encourage growth is to enable companies to have the maximum of profits available for development, in the way which the Bill enables.
I will indicate once more the effect of this tax. There has been so much criticism that one would imagine that its impact will be such that every company will be worse off under it than under the previous tax arrangements. This is far from the case. As I said on a previous occasion, at a Corporation Tax rate of 35 per cent., the break-even point is a dividend of 51½ per cent. By "break-even point" I mean that if a dividend of 51½ per cent.—that is, of the gross profits: before tax—is paid, then whether paid under the old or the new method the amount available to the company is the same.
The amount retained is the same and the dividend is the same. Under a 40 per cent. rate of Corporation Tax, 39½ per cent. is the break-even point—a dividend of approximately 40 per cent.

of the gross profits, which is a substantial amount.
I turn to the question of the retention that is left. Under the second example I gave, a simple case, 40 per cent. goes in Corporation Tax, 40 per cent. in dividend and 20 per cent. is left for retention. For close companies, the figure for retention could be increased to 24 per cent. if the company distributes the proportion of profits which eliminates the vast number of companies from the formula in the Bill—namely, 60 per cent. of the net dividend. The retention could be increased to 24 per cent., and at 24 per cent. no question would be asked—about whether or not the company needed any further funds to develop—why the dividend was not higher.
This point comes out even more substantially if one were to assume a rate of 35 per cent., which is the approximate figure which yields very approximately the same amount of tax as under the present system. There, at 35 per cent. and with a break-even dividend of 51½ per cent., the retention is only 13½ per cent. In short, under the new system, which has been represented as being so harsh and unfair on shareholders, there need be a retention of only 13½ per cent. before the system results in an equal burden.
Under the close corporation rules, one can, with a 35 per cent. rate of Corporation Tax, retain up to 26 per cent. On a 35 per cent. rate, 60 per cent. on the net rate would mean a 39 per cent. dividend and a 26 per cent. retention. So, the retention can be doubled before any questions are asked under the close company rules about why a larger dividend was not paid and about the justification for retaining funds. This demonstrates that the burden of this tax is nothing like as great as it is supposed to be. And, as we know, most companies pay on about 50 per cent. of their gross profits, so here that would mean that for every one of those companies which paid 50 per cent. or less, they would be better off under the new system than under the old.
The difficulty is that those who will be better off have joined the silent brigades and have not made their voices heard. We have only heard from those who might be a little worse off. They have certainly made their voices fully, clearly and vociferously heard.
I will give some examples of what the resulting position would be. I received only today a document which is well known to those who are interested in the City. It is Moodie's Review for 2nd July, a perfectly objective document which contains a section called "The Impact of Corporation Tax". It lists a number of well known and fairly well known companies under the heading "Beneficiaries and the Reverse". It refers to those companies which will be better off and those which will be worse off. There are more companies in this list which will be better off than will be worse off if one removes from the list of companies which will be worse off, those who under the present system are not paying their dividends out of their earnings.
Some of those companies are paying their dividends, even with Income Tax and Profits Tax, partly out of their reserves. If one eliminates those, one finds in this list—and I agree that it is not an exhaustive list but certainly a list which gives a number of examples—that more companies will be better off than worse off.
I will name some of the firms. Under aircraft companies we find Westland Aircraft; breweries, Truman and Hanbury; building, Laings; food, Tesco; hotels, Strand Hotel; household requisites, Prestige; mechanical engineering, Qualcast; motor cars, Jaguar; newspapers, Associated News and Financial News; radio and television, Granada and Thorn; tobacco, Carreras. These are all family names, as it were, in investment circles and all will be better off under the new tax than under the old. I thought it right to trouble the House with these facts and figures since one hears so little about the companies which will be better off and so much—indeed, endlessly so much—about those which will be worse off.

Sir John Barlow: Will the right hon. Gentleman publish that document in the OFFICIAL REPORT?

Mr. Diamond: I cannot undertake to do that. I am giving Moodie's Review a free "ad". I am sure that the document is well known to anyone having the slightest connection with the Stock Exchange. I am sure that the hon. Baronet will be supplied with a copy, probably free. If he finds any difficulty

in obtaining one, he can have mine with pleasure.
Why, then, has there been so much criticism of the effect of the structure of this new tax, apart from the fact, to which I have already referred, that the criticism has come exclusively from those who might be worse off and that we have not heard a word from those who might be better off? As long as one accepts that on balance, the numbers are approximately equal, we can debate the matter in its right proportion. It is the case, by and large, that most small family companies will be much better off because, of course, those small companies do not declare dividends at all. Generally speaking, the whole of their profits go to the directors in the form of remuneration—probably one or two people who run the company; possibly a man and his wife—and every accountant knows that this is the position of this type of small company. With few exceptions those companies will all be better off.
It is only in the case of the foreign company—with which my right hon. Friend has already dealt and to which he may find it right to refer again in his speech later today—and some of the larger domestic companies where the burden of tax will be felt. The criticism is also based on the distinction which the new structure draws between the shareholder and the company, and I will spend the final minutes of my speech on this subject. It is absolutely true that the company and the shareholder are two distinct legal entities. It is absolutely proper, therefore, to devise a system of taxation which takes that legal fact into account.
Of course, what we have all said in different ways is that the company belongs to the shareholder, and there is no real, fundamental conflict between the interests of the shareholder and the interests of the company. I am not here changing my tune, but trying to analyse where the discrepancy comes from, and to point the moral.
The complaint, therefore, comes not from the shareholder vis-à-vis the company in terms of the long-term interests of the company, because if it is in the long-term interests of the company it is in the long-term interests of the shareholder, to whom the


company belongs. If it is in the long-term interests of the company to plough back, to reinvest and to develop, as this tax reform encourages, with a view of maximising the growth of the company and its future profits and future dividends it is also in the long-term interests of the shareholder.
Where the conflict arises is between the short-term interests of the shareholder and the company—the board. The conflict arises because this tax encourages the manager who wants to develop, who wants to see growth and to see new plant. It encourages the worker who wants to see the benefit of his extra effort in terms of additional facilities and additional welfare, which is all in the interests of the company. The conflict is between that aspect of our company life and the shareholder who wants to see a dividend this year, who wants to get the maximum dividend this year, and, as I have already said, to spend it.
Those who are interested in that are not only the individual shareholders. The finance houses, which have been fully represented throughout our debates, are purely interested in getting the maximum dividend, because that is their business. Their business is to invest, and to collect maximum dividends. They are far more interested in the immediate dividend than in the long-term welfare of the company. That is where the conflict of interests arises, including unit trusts—

Mr. Geoffrey Lloyd: Does the Chief Secretary seriously include in what he says, investment trusts, which very much look to the long-term development of their investments?

Mr. Diamond: I include all those financial houses whose business it is to invest and to distribute as much as possible, and whose standing depends on the success they achieve in increasing the rate of dividend to their shareholders, who are often investment trust and unit trust shareholders. That is why they advertise—they must know their business. That is the basis of their advertising—the increase in return and the increase in value that stems from the increase in return.
That is where the real conflict lies and what the argument has been about, and

why we have had criticism from those who represent the shareholder in his position as one who is interested only in the dividend, and its spending, as opposed to the shareholder who is interested in the long-term development of the country. The person who is more interested than that shareholder is the manager, who is concerned to use the resources in the first instance for the development of the company—

Sir Cyril Osborne: I beg the Minister not to exaggerate a good position. He must bear in mind the fact that a shareholder can die in the short run, and, therefore, has a legitimate interest in the short run which the company does not fully share.

Mr. Diamond: I recognise that as something that must happen to all of us in time. The shareholder may die in the short term, so he has a good reason in those cases for looking at the short term, but, as I am sure the hon. Gentleman will recognise, that is a further argument in support of what I say, which is that the distinction, the conflict, is between those who are interested in the short term, the receipt of the cash dividend, and those others—mainly managers, managing directors and boards—who are interested in the longer term in the development of the company. We are on the side of the long-term development and growth. That is our function.
This tax also discourages the holding of idle funds. The rule is either to develop or to distribute—not to hold idle funds, often in the form of portfolio holdings, which is what the tax discourages. It is because it does these things, it is because it represents a move from what my right hon. Friend calls the slothful company and because it represents a move from sloth to growth and a step towards justice, because it is a tremendous encouragement to efficiency and to development, that I hope that the House will be good enough to give the Bill its Third reading.

4.45 p.m.

Mr. Edward Heath: I have no doubt that the House was heard to share the deep sigh of relief with which the Chief Secretary approached his final performance on this Bill. In some ways it is rather sad to think that this familiar


gathering of those who have been pursuing the Bill is meeting probably for the last time—certainly until the autumn. We have spent 21½ days on it—211 hours. We have seen 1,222 Amendments—440 put down by the Chancellor of the Exchequer himself, and 680 by the Conservative Opposition So perhaps we can congratulate ourselves on having reached the point at which the Chief Secretary can utter a sigh of relief.
It is customary on such an occasion to pay tribute to the Ministers who have been handling the Bill. That practice was always followed by the Chancellor, when in opposition, and I gladly emulate his example. I am quite sure that he will agree that the brunt has been borne by the Chief Secretary and the Financial Secretary. Seldom can any Ministers have had a more objectionable task thrust upon them than to pilot through the House a mass of ill-thought-out half-baked legislation—especially when it was constantly being revised even while they were themselves trying to master it.
Considering the strain under which they were labouring, they have both shown remarkable patience and courtesy. If the Chief Secretary was forced, at times, to, fall back on threadbare and rather out-dated dogmas—well, that was all he had to fall back on. We shall always treasure the jewels that fell from his lips. I well remember the occasion when, as at least three complete clauses of the Finance Bill were being rewritten, he uttered the memorable words:
It is all going beautifully, swimmingly and straightforwardly.
There was also the joyful statement, which he has tended to repeat since, that life for the businessman will now be simplicity itself. I wonder whether that was what was said to the Chancellor last night by the business men whom he met.
Then there was the Financial Secretary, who laboured so hard—no point too detailed for him to make completely inexplicable, and no explanation too lengthy for him not to be able to expand. He has one achievement to his credit which we shall always treasure, and that was his constant ode in praise of high taxation—the inter-related inevitability of high taxation, as he put it. He welcomed high personal taxation and a high Capital Gains Tax to go with it. He was in no way upset by the thought of high Estate

Duty to go with both—normally defined as "MacDermot's Law". The hon. and learned Gentleman has confirmed that the Labour Party is forever the party of high taxation.
The Minister without Portfolio, whom I am glad to see present, and the hon. and learned Gentleman the Solicitor-General, who is not with us, did their best to understand the Bill. If they ever did understand it, they never succeeded in conveying it to the House as a whole. The Chancellor was with us as often as his other duties permitted, and we recognise that those other duties are onerous and numerous. At times, he unwisely tried to rush the Committee but, patience having been learned, he delivered high-sounding homilies which, though of little substance, were always agreeable. The right hon. Gentleman will, of course, always be remembered as the Chancellor of the Exchequer who brought to a standstill the gilt-edged market as a result of his intervention.
Seriously, however, I pay tribute to the Treasury Ministers. I hope that they will not feel in any way abashed. I also pay some tribute to my hon. and right hon. Friends. Treasury Ministers laboured hard for six months on this Bill before it was introduced. It landed with a heavy thump on our plate a fortnight before Second Reading and then there was a week before the Committee stage. Every commentator has agreed that this has been the best argued Finance Bill for many years. That is a tribute to the work of my hon. Friends and the skill and efficiency with which they have mastered it and tabled nearly 700 Amendments. The Government owe most to three of their hon. Members, the hon. Member for Manchester, Cheetham (Mr. Harold Lever), the hon. Member for Heywood and Royton (Mr. Barnett) and the hon. Member for Birkenhead (Mr. Dell), who have kept the Government in power for the past three months while at the same time agreeing with the Opposition on almost every criticism. But they have voted in the Lobby with the Government and on one occasion voted against their own Amendments. In the world of Socialism they are bound for a speedy plunge into higher spheres.
It may be thought that after so much discussion there would be little more to say. The Chief Secretary obviously did


not take that view, but this is an opportunity to look at the Bill as it is and to see what effect it will have. The Chief Secretary repeated the great claim of the Chancellor that this is a work of major reform. The Chancellor has never hidden the fact, and he has said in public, that he wants to be known as the great reforming Chancellor. This obviously is his philosophy. It will not give him much of a niche in history if at the same time the economy is out of control and the balance of payments fails to improve. Those are the real priorities to which the Chancellor should address himself.
The Chancellor has accused us of being against reform. I have already denied this and have said quite clearly what our policy is. The Prime Minister last Tuesday at Question Time made a rather foolish remark that the Opposition is against reform. This is nonsense. My right hon. Friend the Member for Barnet (Mr. Maudling) himself published a Paper "An Accounts Basis for Income Tax". That was a policy for Income Tax reform. Moreover, we have not opposed the principle of the Capital Gains Tax or of the Corporation Tax at any stage in the debates on this Bill. Neither on Second Reading nor on Report has there been opposition to the principle of these taxes. What we have done has been to oppose as strongly as we could the form in which both these taxes have been introduced and to point out the consequences as we see them in their present form and the results of the timing of the Chancellor's activities.
We have done our best to improve the Bill and at the same time to point out where we think the weaknesses still lie. It remains true, and I repeat this, that at a time of intense economic difficulty when all the energies of companies and their advisers and the workers in them should be concentrated on production and sales effort, particularly overseas, everyone has become intensely involved and preoccupied in the form and consequences of the new taxation being introduced. This cannot possibly be right. This has been a classic example of how not to reform tax legislation. There are serious lessons to be learned from the experience we have all undergone.
There was the bald announcement by the Chancellor last November of the two

new taxes. That produced great uncertainty and it was followed, under pressure, by a statement which raised more questions than it answered. There was then complete silence until the publication of the Bill. Meanwhile the Chancellor received massive representations from many of those affected. The Bill showed that no notice had been taken of any of them, no notice at all. After the Second Reading debate, when the Bill was attacked from both sides of the House, a rapid rewriting of the Bill began. Clause 79, with the overseas effects of Corporation Tax, Clauses 60 and 78 and so on, were rewritten. Continuous rewriting went on during discussions on the Bill.
The consequences for Parliament have been quite dramatic. This has meant that we have been forced to sit for four days a week and many nights, frequently for all the night, on the Bill. Many hon. Members have had the utmost difficulty in keeping pace with the changes made in the Bill while it was before us and understanding what the changes meant. Professional organisations outside have had the utmost difficulty in foreseeing the consequences of the legislation and the changes proposed by the Chancellor on which they could advise hon. Members. It is clear that many more points will emerge as the Bill comes into effect and many more difficulties will be encountered.
These could have been dealt with if the Bill had been properly considered in the first place, properly drafted, and if time had been given for everyone to consider it. For all this the Chancellor and the Government must take responsibility. This has been a lesson in how not to reform tax legislation. I hope that we have made our position clear that we recognise the need for reforming and simplifying tax legislation and that it should be done after proper discussion and consideration and that the House has to be treated properly when a Bill is going through it.
What has been achieved on the Bill by the Opposition? This process has been going on for such a time that much has passed from memory, but I was surprised that the Chief Secretary made no mention of the degree of changes which were made during the time the Bill was going through the House. I shall mention only


a few. In Capital Gains Tax the alternative basis was changed from two-thirds to a half, a very important change. The allowance for retirement provisions has been changed. Goodwill has been put in in the replacement of business assets after the Government had twice voted strongly against it. This affects thousands of businessmen and members of the insurance profession. Arrangements concerning insurance companies overseas have been improved and life policies have been affected. Provision has been made in connection with a dependent relative's house of those serving abroad. Mergers of housing associations receive exemption, forestry provisions have been allowed for and, after much pressure from this side of the House, a concession has been made on free depreciation for shipping. There was also the concession to help the blind. These are considerable changes in the Capital Gains Tax effects of the Bill.
On Corporation Tax, perhaps the changes are even more marked. There have been very considerable changes in the close company provisions, including the 35 per cent. proportion of public participation which excludes the close companies. There is the removal of the limitation on total directors' remuneration and changes in individual directors' remuneration. Administrative arrangements have also been greatly changed. The forestalling provisions in Clause 78 have been completely rewritten and the interim arrangements for companies trading overseas have been changed from five to seven years. These are some of the major items in which the Bill has been changed while it has been going through the House.
This has been a considerable achievement, not only by the Opposition but by the House as a whole, in changing and improving the Bill. The Chancellor has been wise to make all these amendments. He would have been wiser still if he had made the alterations in the first place when many of these things could have been put right. There still remains much to be put right. On capital gains the rate remains high. The Chief Secretary has always said that this is a moderate, simple affair. He has produced figures to show that the total amount will fall on only 10 per cent. of those who pay the tax. That remains to be seen. We shall see whether the computer in which he puts

so much faith is right, but this is a high rate.

Mr. Diamond: I am advised that 58 per cent. will fall on the 10 per cent.

Mr. Heath: I accept that figure from the computer. It is a high rate and inflation is still being taxed. Gilt-edged—apart from the neutral zone, including investment clubs, charities and superannuation funds—will be taxed. On this, we saw the most ridiculous point of all when the Chief Secretary said that if only the charities and the superannuation funds would take themselves out of the normal investments or unit trusts in which they are investing at the moment they could escape all this tax. He was quite prepared to see the necessary damage done so that they should get this exemption, without allowing them exemption in the place where the investments are best handled.
The compulsory purchase funds, even when reinvested, will still bear the tax. A retailer can change only in his own trade. He cannot change in another one. Above all, in Schedule 9 there are still the powers, to which so many in the House took exception, for the enforcement and policing of the Capital Gains Tax. I myself felt that perhaps insufficient consideration was given to the new Schedule 9 which was put before the House. Obviously I cannot discuss this, Mr. Deputy-Speaker, but I emphasise to the Chancellor and the Chief Secretary once again how important it is that the rights of the individual should be properly protected and properly handled when there is policing of that kind. I can assure him that this is a matter which we shall watch with the greatest care.
There are also aspects of the Corporation Tax to which we object. The Chief Secretary has repeated once again his argument about the separation between companies and their shareholders. He said that he had not changed his tune. If he studies his earlier speeches, he will find that the emphasis there was quite different from that today. He has emphasised that there is the legal difference between the two entities. He went on to say that we all now recognise that the interests of shareholders and of companies cannot be separated and that both are interested in the other. This was not the argument he adduced at the


beginning of our debates on the Bill. In practice, the two cannot be separated.
Indeed, the difference was broken down by the Amendment which was forced upon the Government when they were thrice defeated on that memorable evening. The Government twice bitterly opposed that Amendment, and yet as soon as it was forced upon them they accepted it. Apparently it made no difference to the Bill if it was accepted. What sort of Bill is this on which the Government can be thrice defeated and then immediately accept the Clause? Not another word is heard about it. They do not try to take it out or alter it. They accept it.
What is more, they accept our wording without even a quiver from the draftsmen, who usually say that the wording is not quite what the draftsmen would like. What sort of Bill is it on which the Opposition can force the Government to accept Amendments which they have twice forcibly resisted and the Government do absolutely nothing about it? So we do not accept the division which the Chief Secretary has tried to make.
On the question of dividends, one of the points which is in the Bill to which again we take exception in the overseas respect of Corporation Tax is the dividend freeze for seven years which has resulted from the Chancellor's extension of the interim arrangements. I do not believe that anybody in the House who was following this at the time, not even those on the Chancellor's own side, believes that this is justifiable on any grounds.
The next thing about the Bill is the devaluation of investment allowances. This the Chancellor has done without being able to produce any shred of evidence as to whether it is a wise decision or not. It is agreed by everybody, even by his own hon. Friends who have expert knowledge of this, that much more information is required before a judgment can be formed on it. Yet the Chancellor rushed in with the tax without having any idea as to whether this by-product would help industry or damage industry. This, too, we must now watch with the utmost care.
Then there is the permanent impact on investment overseas. There is, perhaps, a belief in the Chancellor's mind

that, because he has been more helpful to all of us by extending the transitional provisions of the Corporation Tax to companies trading overseas, this therefore has settled the problem. It has not. The permanent arrangement is there. What is more, the companies which are affected by it have to make their plans a long way in advance. So very soon, within a very short period, we shall find their overseas plans being affected by the Corporation Tax as it now is.
The Chancellor again nods, because he says that his only purpose is to reduce investment overseas. This is where we differ from him, in that we say that this is an indiscriminate approach which will damage that investment which in fact helps our balance of payments. I do not want to go over the figures, because they have been produced on so many occasions. This, too, is one of the matters to which we object.
There is one point which I would like the Chancellor to clear up when he, as I expect, winds up the debate tonight. He said in Committee that he had discussed this question of overseas investments with firms and with industries and added:
My view is … that overseas investment will continue on a very substantial scale. I have no doubt of that. I am reinforced in that by the views of the chairmen of companies who have been in touch with me. Their fears have been of the effect of Stock Market quotations if they had to reduce dividends. The interesting thing is that nearly all of them have told me that they intend to continue with overseas investment, and that is the basis of the Bill. The shareholders will suffer, they say, but they intend to go ahead."—[OFFICIAL REPORT, 22nd June, 1965; Vol. 714, c. 1572.]
This was immediately denied by the representatives of the largest group who had been in contact with the Chancellor of the Exchequer on the whole of this question of the overseas tax. It was denied in a letter to The Times on 25th June in which Sir Christopher Chancellor, Mr. Val Duncan and Sir Duncan Oppenheim said this:
Neither in the memorandum presented to the Chancellor nor in the verbal representations made to him was reference made to any decision on the part of these companies to proceed with their investment plans at the expense of their shareholders",
which is precisely what the Chancellor had alleged. Later on we are entitled to an explanation from the Chancellor, because as far as I know he has not


given one publicly yet as to how it is that his own statement has been denied by those who, as they say, represent 16 of the greatest companies with overseas assets, of, I think, some £2,500 million. They have taken exactly the contrary view and say that they are not prepared to see their shareholders suffer.
The third argument of the Chief Secretary's, to which he has again referred today, is that of plough-back. He concentrated on this. He has been unfair and inaccurate in the remarks he has made about the interests of shareholders. I think that my right hon. Friend will probably wish to take up with the Chief Secretary his quotation from the Bank of England Quarterly Review, because now that we have looked at it we see that there are other factors to be taken into account in the movements which he has mentioned. What he is arguing is that those who pay out less are those who will be better off under his tax, if he likes to call it "better off".
I should not have thought that this was a particularly satisfactory situation, but it emphasises the difference of approach between the two sides of the House. The Chief Secretary believes that he can achieve growth by allowing people to keep much more and he hopes that they will damage the interests of their shareholders in doing so. We believe that the right approach to a dynamic economy is to see that firms pay out to their shareholders and that this money is re-invested in the firms which can attract the money because of their rate of growth. These are two quite separate approaches, and we cannot baulk this particular question.
My concluding remark on this aspect is that the countries which have the greatest growth are those which encourage profits to be paid out. This cannot be denied on all the European evidence. One of the factors which distresses us most is that the way the Chancellor has organised this Corporation Tax means that we are moving in precisely the opposite direction from that in which the rest of Europe is today moving. As a result of recent decisions, it is quite apparent that by means of the Corporation Tax they have moved to a tax the consequences of which will be approximately that of our present arrangement of taxation before the Bill comes into effect.
Has the Bill gained the purposes for which the Chancellor introduced it? First, the Capital Gains Tax and the Corporation Tax. The Chief Secretary said that, in their impact on justice and social equity and because of the Corporation Tax's adverse effect on investors, this was supposed to help the achievement of the incomes policy. This was the real reason why it was announced so prematurely last November. Has it had any effect on achieving an incomes policy'? Let the Chancellor be frank and admit that it has had none. Have we heard it cited in any of the arguments over wages in the unions? Did the members of the Transport and General Workers' Union say at their conference how much they welcomed this because it would enable them to follow the incomes policy?
Of the 42 wage settlements which we have had, so far only one has been within or below the norm and that, somewhat ironically, was for the 204,000 hospital workers, whom the Government have allowed 2½ per cent. Dare I remind right hon. and hon. Members opposite of all the things they said about hospital workers in 1962? Have the Government said in dealing with the other wage claims, "We will not have 10 per cent., 15 per cent., 19 per cent., or 20 per cent., because of the Capital Gains and Corporation Tax"? Not at all. These taxes must be judged on their merits as part of a fiscal system.
Then the tax on consumer goods, in Part I of the Bill which we now tend to overlook, has greatly increased the cost of living. This has increased the pressure on wages. We now have the situation in the first seven months of this Government when there was a rise in the index of retail prices of 4·5 points, an annual rate of 7·2 per cent., which is higher even than that of the last Labour Government of 1945–51. A large amount of this has come from the deliberate policy of the Chancellor of the Exchequer.
What is the effect of the Bill on savings? We are seeing a diminution in savings in almost every respect. The figure of National Savings in the first quarter of 1964 was £80·6 million. In the first quarter of 1965 it was £44·5 million. From 14th June to 10th July, 1964, there was an increase of £28 million. For the


same period in 1965 the increase was £14 million. This is the effect of the Chancellor's policy on National Savings.
Building societies in the first six months of 1964 had an increase in savings of £271 million. For the same period this year the increase was £154 million. In the unit trust movement there has been a similar diminution. In April, 1964, the figure was £6·80 million. In April, 1965, it was £3·46 million. In May, 1964, the figure was £7·76 million and in May, 1965, it was down to £5·46 million. All the indicators are that at this period, when there ought to be increased savings and investment in plant and industry, as a result of the Chancellor's policy the savings are falling in every direction for which there are indicators.
With regard to industrial production, we sustained a great deal of criticism last year from the Chancellor and his hon. Friends about a stagnant level of production. The provisional index figure of 131 for April is back to what it was between November and December. It is lower than it was in January and February. The figure for March was back to what it was last November. Over this period the Chancellor cannot show any increase in production. Indeed, the immediate rise was followed by a fall.
In balance of payments, we see a situation in which imports have returned to a more normal figure and exports have levelled out. That is using the most neutral phraseology of which one can think. But, as far as I can see from the figures, imports of goods which are subject to the surcharges have increased in value by £40 million and the goods which are not subject to the surcharges have fallen by £59 million. So we see that raw materials and foodstuffs are the categories in which imports have fallen, and those are the categories which have not been subject to the surcharges. What is more, in the first six months the Chancellor is £190 million out in his original calculation of the impact of surcharges on this country's trade.
Putting all those things together, can one say that this Finance Bill and the policies embodied in it are achieving the purposes of a new system of taxation to produce a dynamic economy? There is no sign whatsoever that this Bill is

producing the results for which the Chancellor designed it.
What about the future? I have tried to indicate the mistakes which the Chancellor has made in handling this Bill. We on these benches will certainly not make the same mistakes. Obviously many of the Chancellor's difficulties have sprung from two factors. The first was the prior commitment of the Chief Secretary last July to the Corporation Tax. The second was the prior commitment of the Prime Minister in the election to 100 days of dynamic action. From both of those sprung the Chancellor's hasty decision to introduce the Corporation Tax and the Capital Gains Tax.
As a result, before he could see how the economic situation was going to develop, following the crisis of confidence in his own Government, he was committed to this enormous burden of the Finance Bill and the effects of these two taxes. The Chief Secretary, if he wanted to alter the amount of retentions, could easily have done it under our present system. If the Chief Secretary was upset by the various forms of tax avoidance, he could easily have dealt with it under our present system without this Bill, and it would have left him and the country free to deal with the economic factors.
In the past it has been customary for those speaking on this side of the House not to make specific commitments on tax matters. I believe that this has been a wise approach to these complicated matters of taxation. How often in the last few months the Chancellor must have regretted his premature commitments with which he so foolishly undertook to burden himself. We on this side of the House will adhere to the normal sensible custom in this matter.
I described this Finance Bill originally as nasty, brutish and long. The House will, I think, agree that we have succeeded in making it rather less nasty. The Government have succeeded in making it rather longer. Our aim in the future must be to simplify the tax structure, and not in a way which is damaging to the economic interests of this country.
I have outlined our objections to this Bill as it stands, and that is the reason why we shall divide against it tonight. We cannot foresee in what economic


circumstances we shall be returned to power—[HON. MEMBERS: "When."?] As soon as the Prime Minister is prepared to face the country.

Mr. J. J. Mendelson: Look at today's Daily Mail.

Mr. Heath: The hon. Member need not have worried about the big stick which was brandished at him last night if he felt as confident as that. We cannot foresee the economic legacy—

Mr. Mendelson: rose—

Mr. Deputy-Speaker (Dr. Horace King): Order. The hon. Member for Penistone (Mr. Mendelson) must not start his election campaign now.

Mr. Heath: There is an unaccustomed liveliness in the proceedings.
We cannot foresee in what condition the Chancellor and his hon. Friends, as a result of this Bill, will leave the economy. We shall look again at the whole situation created by this Bill. We shall not hesitate to amend it drastically or to repeal any provisions which prove to be damaging to our economic progress. If the House accepts that there is room for two arguments about some of the things to which we devoted our attention—the best method of promoting growth, the use of investment allowances, the balance of investment overseas—it must also agree that if we find that the Bill is damaging in these respects, as we say it is going to be, we should reserve the right to deal in any way that we feel necessary with these provisions.
It is essential that in this country we should get our economic priorities right, and I do not believe that the Chancellor in the action which he has taken has done this. We shall do it, and taxation legislation will take its proper place in those priorities. We have often criticised the Chancellor and the Chief Secretary for their obsession with tax avoidance. Of course, we have always agreed that major items of tax avoidance must be dealt with. They have been dealt with by every Conservative Chancellor during the past 13 years. There has not been a Finance Bill, except for the short one in 1955, in which items of tax avoidance were not dealt with. One can think of innumerable examples of dividend stripping which the former Chief Secretary

recognised and where legislation was taken.

Mr. Mendelson: Does not the right hon. Gentleman recall how Lord Amory, when he was Chancellor of the Exchequer, came to the Box and told the House time and again that every time his Government had tried to stop a loophole, within nine months the situation was far worse than it was at the beginning? Over the years, by their own spokesman's declaration, they have never dealt with the subject at all.

Mr. Heath: I have seldom heard such a non sequitur from the hon. Gentleman, who has an academic background and is thought to be logical. The Chief Secretary will not deny that the measures that he has taken will also be outwitted. Indeed, his hon. Friend the Member for Cheetham, has often indicated means by which this can be done speedily and with the utmost respectability. The Chief Secretary has promised us Finance Bill after Finance Bill which will be entirely concerned with tax evasion. The matter has got to be given its proper priority. No figures of tax evasion have been given to us. How can the right hon. Gentleman make serious and balanced decisions if he has no idea of the extent of tax evasion?

Mr. William Baxter: It is difficult to give a precise figure for the amount of tax evasion, but surely it is within the right hon. Gentleman's knowledge that many of his hon. Friends have practised this in the past, and a moment or two ago he said that it was a quite legitimate thing to do.

Mr. Heath: I have said absolutely nothing of the sort. I said that I was opposed to tax evasion but that there always will be those who will find ways round which are not illegal, and then the law has to be changed to deal with them. None of my hon. Friends, as far as I know, has been involved in tax evasion. They have certainly not confided ways to me. The hon. Member for Cheetham has been much more helpful in public about this.
We have not had even an approximation of what is involved. It is simply a case that for 13 years the Labour Party campaigned the country on the basis that economic problems could be


solved, taxes reduced, and the balance of payments balanced if only tax avoidance was stopped. It has been purely a political campaign. By their very attitude, expressed in the Bill, right hon. Members opposite have got at loggerheads with a large part of industry and finance. The Prime Minister was less than frank with the House this afternoon on this matter. The First Secretary spoke in the House of a sleazy conspiracy between the City, industry and the Press, but the Prime Minister on television was frank enough to say that this was not the case. He repudiated the First Secretary then. He should have repudiated him again this afternoon.
It is by their own attitude that the Government have got at loggerheads with industry and with finance. I believe that the changes which the Chancellor has wisely made in the Bill will ease this position. It is in the national interest and that is why we have encouraged him to do this. If hon. Members opposite have been so critical of the views of my hon. and right hon. Friends, why has the Chancellor and his fellow Ministers accepted so many Amendments and rewritten the Bill, in the way suggested from this side of the House? It was because they thought it right to do so. I hope that this will enable a proper atmosphere to exist between the Government and industry. This is in the national interest. Our attitude is to encourage all who work in industry—and we make this a foremost aspect of our policy—to encourage greater production and create greater wealth and to see that that wealth is shared among those who take part in the creative work of industry.
This can be done through the numerous means of small investments and share ownership. I could hardly believe my ears when I heard the Chief Secretary today praising the small investors for putting their money into institutions, thus enabling it to flow into industry and create greater wealth, while throughout our proceedings on the Bill he strongly resisted any changes proposed by us to secure that effect. Our policy will be to encourage industry and thus create greater wealth and increase the country's trade. This, in our view, must be put first, because upon it depends not only the welfare of our people but the economic survival of this country.

5.25 p.m.

Mr. Harold Lever: I should like to begin by respectfully adding my words of congratulation and compliment to those offered by the right hon. Member for Bexley (Mr. Heath) to the Treasury team who have taken the Bill to its Third Reading. Their ability has been extraordinary and their courtesy in the face of extreme difficulties and not a little provocation, even from this side of the House, has been very great indeed. I am filled with admiration for their self-control and their intelligence. There has not been since I have been in this House a Treasury team as able as this one.
As for the Opposition, I can pay them no greater compliment than that already so gracefully paid to them by the Government on more than one occasion in accepting their Amendments, occasionally accompanied by Divisions in favour of the Opposition but frequently on the basis of reasonableness.
I cannot see why the right hon. Member for Bexley holds it as something evil in the Chancellor that when a case is made out for improving the Bill he should have accepted it. We have all to earn our living and we all have an interest in the Finance Bill, and no one suggests that hon. and right hon. Members opposite are maliciously conspiring to destroy the country and its fiscal and financial structure. It is therefore conceivable that reasonable Amendments are sometimes put forward by hon. and right hon. Members opposite, and the Chancellor has often accepted them.

Mr. Heath: I said that the Chancellor was extraordinarily wise in accepting our Amendments. This is not to criticise him or to say that he is an evil genius. If the hon. Member says that the Chancellor and his hon. and right hon. Friends are out to help the country, would he not accord that same indulgence to my hon. and right hon. Friends?

Mr. Lever: I thought that I had said that with unmistakable clarity. Nobody on this side, and certainly not myself, attributes to hon. and right hon. Members opposite a desire to injure the country or to destroy its fiscal and financial system and that is why I said I thought it entirely reasonable to accept


some of their Amendments. I am grateful to the right hon. Gentleman for paying my right hon. Friend a tribute more generous than he has yet received from anybody else. My right hon. Friend has now been described as extraordinarily wise, and I was happy to hear it. Far from calling hon. and right hon. Gentlemen opposite malicious, I would say that even the Amendments which the Opposition carried had a little merit which perhaps later than might have been the case the Government came to recognise.
I have trespassed greatly on the indulgence of the House at various stages of the Bill and I shall not be tedious and repetitive by rehearsing those arguments now, but I cannot forbear from saying of what has been said of the Chief Secretary and the right hon. Member for Bexley that I dissent very strongly from both of them in their views of how companies should conduct their financial affairs. My right hon. Friends seem to have a passion for the retention of profits. Right hon. Gentlemen opposite are worked up into a fit of enthusiasm by their passion for the distribution of profits. This situation seems to me to be more properly the concern of Freudian psychology than of financial management.
Dividend policy would be better decided by the directors and shareholders who engage in these undertakings rather than by the prejudices of right hon. Gentlemen on either side of the House. It would not be difficult to bring evidence of innumerable companies with a growth record which would be penalised by the retention provision of the Bill, and equally of companies which would benefit from these provisions. Equally, I could tell the right hon. Member for Bexley that many growth companies would be greatly penalised by being forced to distribute their profits in the manner which he has suggested. Neither course is wise.
The State must look more flexibly on this matter. There are companies which have expanded greatly and which are in the habit of paying out nearly all their profits, like the property development companies. It is useful sometimes to remember that these companies have a function apart from supplying suitable material for perorations in election speeches—they actually develop property. It must be borne in mind that they are not fiscal outlaws which are to be penal-

ised, in contrast with people who retain profits.
I could go on citing companies that pay out a great deal, not only property companies, but concerns like Marks and Spencer, which do all the things we like in the way of developing welfare services, using modern methods and recasting their ideas, all with a relatively high pay-out of dividend. Then there are by contrast the insurance companies. Legal and General, for example, have had phenomenal growth records on a minute payout in dividends.
The position varies from industry to industry, and nothing I have heard during the course of our debates has led me to change my opinion that the people who know something about the way their businesses are run and the needs they have should be left with the deciding voice on this without a penalty on dividend paying or a premium on extension.
When we talk about companies having idle funds and even indulging in portfolio investment, we should consider what actually happens to the idle funds when they are not invested. If an industry is to be developed, money has to be found by share subscription and the like. It is a great pity that the words "portfolio investment" are taking on unfortunate overtones which should be removed.
I want to concentrate on the effect of Corporation Tax upon overseas investment. It is a matter upon which I have reflected a great deal since we had our deliberations on it, and I have a good deal of disquiet about the ultimate longterm consequences of the effect upon overseas investment. The Chancellor showed one of the great, general gestures of the Finance Bill in the immense concessions he made from the original position taken up in the Bill. He has thus changed the position and made it one from which we can consider further improvements, take stock and take counsel, to see where we should go from here.
As a temporary measure, I also agree with the Chancellor in seeking to restrain the pressure upon our exchange reserves in further overseas portfolio investment at the present time, and even a partial repatriation of funds would be of help at the present time. But it would be absolutely wrong to suppose that it would be best in the interest of the country to


throw away permanently the vast expert knowledge in portfolio investment overseas that has been accumulated over a very long time and the immense connections we have built up. I beg those who hold a different view to study the facts about the matter. It will be found that on our portfolio investment we have shown not merely a very fine income but an immense capital appreciation.
My right hon. Friend has, until recently, been one of the big portfolio investors in the shape of the 1,250 million dollars' worth of dollar securities. Perhaps the Chancellor will mention the figures of the immense capital gain the country has got from that. But my right hon. Friend has made it plain—and some of the Opposition comment has not been helpful in this respect—that he favours overseas investment, and what he sees in the situation is competition between two goods: the good of overseas investment, and the good of having greater reserves than we have at present, thus avoiding the pressure upon them which gives rise to credit squeezes and financial deflation.
I would suggest a third way to which the Chancellor ought to start turning the Government's mind, particularly in relation to overseas investment. The trouble about this investment in the past has been that when the country has had a good year, if it has invested overseas this has gone into private hands. When the country has had a bad year, it is public funds that have had to meet the deficit. In other words, the left hand of the country gets portfolio investment in the good years, and the right hand—public funds—has to provide the reserve in the deficit years. This cannot go on, but the answer is not a choice of having a portfolio investment or an increase of reserves.
What might be possible to arrange in consultation with those who are intimately concerned is that future portfolio investment should take place in circumstances in which, automatically, that portfolio investment comes into the hands of the Bank of England directly and forms a part of the country's reserves. It would be more useful for the country to have part of its reserves in that form than all in gold, which produces neither income nor capital appreciation. It will be better in this way because portfolio investment

has not been available to help the country in recent years, not because of any malice on the part of the holders but because of the system in which that investment has been allowed to take place. I should like to see the system changed, but not to prohibit portfolio investment. I should like to see portfolio investment take place on terms advantageous to the country.
I suggest that the way to do it is to consult with the big investment institutions which are practised in this matter, and see whether a means cannot be found of adding this portfolio investment automatically to the reserves as they are accumulated in surplus years, so that in deficit years the Government will have it available. It is too late to do it when the deficit is upon us. If the Chancellor were to attempt in present circumstances to lay hands on existing portfolio investment to defend the £, the probable psychological consequences would be so serious that he would lose more than he would gain in protecting sterling. It has to be done in advance.
Many of my hon. Friends say, "Why have these overseas investments at all?" What they are really saying is, "Why have an investment surplus at all?" If we invest at home, we will not have an export surplus. That is really saying we will not have an increased reserve for deficit years brought about by fluctuations in trade, and to deal with consequent pressure on our currency. This country needs additions to its reserves, and it needs an export surplus. The only question for sensible people is, shall our reserves be held in the form of gold or dollar bills, or in part in the form of the kind of investment portfolio that this country uniquely is able to bring into being, because it commands the connections, the skill and the long-time expertise of so many institutions in the City of London?
Looking at the matter with complete impartiality, I am convinced that the country's advantage lies in the future in using portfolio investment for a great deal of the addition to our reserves which we require. Our reserves at present cover only about one-sixth of our annual import bill, whereas before the war, in normal times, our reserves covered about 100 per cent. of our import bill. Before the war, all our sterling liabilities were


covered by reserves. Now, only a fraction of them are covered, if the borrowings we have had to make are left out of account.
I entirely approve of the means that my right hon. Friend has taken in this aspect in the emergency in which he has found himself. I am sure that he will be in charge of other Finance Bills, and I would ask him to look again and see whether he cannot find the means of restoring portfolio investment and the skills that go with it to their useful part in the management of the country's financial affairs. In doing so, he ought to have the added incentive that the present method of taking a proportion of the realised dollar investment is justifiable only temporarily in the emergency in which he has found himself.
After all, he is taking, at below their market value, a proportion of the assets of people who have invested overseas when they come to realise their assets, whether by death or by voluntary sale. I cannot say that this is immediately attractive to me, although I am bound to accept it in the difficulty in which we find ourselves. It is not an insuperable objection to the Chancellor's laying hands on a proportion of the investment dollars which result from these sales to say that he should pay the market price for them. This is not altogether an inconceivable way of dealing with a situation.
On the other hand, I do not want to retrace old ground. I am grateful to the Chancellor for his flexibility during the progress of the Bill. I will not pretend that he has satisfied every criticism of mine but, after all, it is not his main duty in life to satisfy every hon. Member about the Bill. I am glad that he brought in this Bill, because, great though I found some of the mistakes in its original form—even now I find errors and flaws—the Chancellor will go down to history as a great reforming Chancellor, the first reforming Chancellor since the war. He has had the courage to make big mistakes, but he has also had the courage to make big strides forward in our fiscal system, far greater than any of his predecessors has made since I have been in the House.
After this, there will be no turning back. It is all very well the right hon. Member for Bexley saying that he has no objection to Capital Gains Tax or Cor-

poration Tax. All I can say is that the Governments in which he served restrained their enthusiasm from taking any practical form over a long period—[Interruption.]—I do not want to be drawn into arguments about the derisory speculative gains tax, which I lament has been incorporated in my right hon. Friend's tax system. This is a contemptible little tax which should have been abolished at the first opportunity and ought not to have been brought in in the first place. The right hon. Gentleman should not pray that in aid as signs of tax reform.
My right hon. Friend will go down as a reformer because never again in this country's future will people attempt to measure a man's ability to bear fiscal burdens without taking his capital into account. That is gone for ever. It is right and just that it should have gone, and everyone knows that it is right and just. I do not like the form of the Corporation Tax and I hope that we shall move in the direction of a withholding tax and a flat rate of Corporation Tax, as I indicated on Second Reading. That is, I hope, something for the future.
It is my right hon. Friend who has brought in a Corporation Tax at all. The right hon. Member for Bexley says that his party were great tax reformers. He thinks that tax reform consists in shuffling White Papers about from one Chancellor of the Exchequer to the next. It consists in enacting Bills, even if they are not perfect, and turning them into Acts of Parliament and operating them in the country. I will agree with the right hon. Member that further mistakes will be found in practice in the operation of this tax system and I hope that we will put them right. I shall not be afraid to tell my hon. Friend of any new criticisms of mine when I have ceased to ply him with my old ones.
I congratulate my right hon. Friend on his courage and on his willingness to see reason, at any rate over a wide range of our criticisms. I can congratulate the Opposition on having stimulated the seeing of reason in directions which from time to time met with even my approval.

5.44 p.m.

Mr. Geoffrey Lloyd: I prefer the approach of my right hon. Friend the Member for Barnet (Mr.


Maudling), the previous Chancellor of the Exchequer, who brought out his proposals in the form of a White Paper and gave a considerable amount of time for their consideration, to the methods of blundering forward without proper preparation which we have had from the present Chancellor. On the other hand, I was interested in the imaginative scheme of the hon. Member for Manchester, Cheetham (Mr. Harold Lever) with regard to portfolio investment and was glad to hear from that side of the House, for a change, some kind words about portfolio investment. I believe that a great deal of injustice is done to portfolio investment in relation to direct investment overseas, from the point of view of the British balance of payments.
I do not want to go into these matters at length today, but it is interesting, when the President of Chile is here, to recall that, in the 1920s, when we had about 55 per cent. of the ownership of the main industries in Chile in our hands, directly or through portfolio investment, 60 per cent. of Chile's overall imports came from the United Kingdom. At present, when our ownership of Chile's industries and our portfolio investment is only about 10 per cent., Chile's imports from the United Kingdom have fallen to only 5 per cent. of her total imports. This is one of the factors with regard to overseas investment which we ought to bear in mind.
I believe that this is a bad Bill. It is not nearly such a bad Bill as it was when it was first introduced, because of the numerous concessions which have been forced on the Government, but it is still a bad Bill. It is already damaging the financial and economic prospects of the country. It is one of the main reasons that the Government have lost the confidence of industry and finance at home and of responsible financial opinion all over the world. I do not have to underline the importance of this because, of course, from the short term point of view, sterling depends overwhelmingly on confidence factors. The fact that the Bill is destroying confidence at home and abroad is one of the most powerful arguments against it.
Let me be specific. I have in my hand a report, dated 7th July, from the Investment Research Department of the Bank

of New York. It was made after a visit of two experts of the Bank of New York to study the position in this country and Europe. Of this country it says:
There is great concern about the position of the pound which one must say seems logical, and is based on some of the following factors. … The Government budget and the deficit, including both above and below the line items, are both higher than last year and this, of course, does not include any provision for the cost of the proposed nationalisation of steel. … The Government has offered little in the way of real incentives to exports or for the transfer of labour from the consumption to the export industries. Actually, incentives in the private sector have been lowered"—
they are thinking of the Finance Bill—
There has been a real loss of confidence in the Government, brought about by continued blunders and irresolution in tax and other policies.
Of course, this kind of judgment—with which not all hon. Members will agree and which may to some seem strange—are the kind of judgments which are being made on behalf of responsible financial bodies all over the world. They have a powerful influence on the fortunes of our country.
Why, therefore, has the Chancellor introduced a Bill which is already having such dangerous reactions? Commenting on the Bill, The Times said:
The proposals suggest that the Labour Party not merely do not know how business works but that they do not care.
This is a very harsh judgment, yet there is a great deal in the Bill to support it.
First, there is the sheer weight of extra tax which it imposes and provides for. I must refer here to the extraordinary confusion about the rate of Corporation Tax which would be imposed under Clauses 42 to 83. The Chief Secretary continually talks about 35 per cent. The Chancellor has referred to "not more than 40 per cent." Anyone who knows the way in which business people work will agree with me that every board of directors, advised by their accountants, are proceeding on the basis that they have to provide for the worst, which is the 40 per cent. rate. It is the only sensible thing to do.
As a result, a widespread idea is getting about that Corporation Tax will be 40 per cent., and this is accepted. I am not saying that this is right. I want to put to the Chancellor seriously that he should in no way take advantage of the


industrial caution of businessmen for making provision in their accounts by suggesting that it has been accepted in this way. It has not. This is a very serious matter. The difference between 35 and 40 per cent. is 1s. in the £ in the Income Tax on companies on the present basis of tax which, I believe, is about £150 million to £200 million a year.
Secondly, the Bill is causing uncertainty on the grand scale. It was all very well for the Prime Minister to suggest that if only people put into exports a tenth Of the effort that they put into tax avoidance the country would be very much better off. But the Bill has caused more work on the part of boards of directors and tax accountants than anything that has happened for years. I know this because I am in touch with firms of accountants which are advising companies, and they say that there has been a continual series of meetings to try to explain the uncertainties of the Bill.
One particularly disgraceful example of the uncertainty caused is with regard to whether a quotation on a public stock exchange exempts companies from the close company provisions. There was no provision for that kind of exemption at the beginning. It has meant that a tremendous number of companies have been anxious about this point. Even up to the last few days the Chief Secretary was arguing strongly against any such form of exemption. Even on 6th July he was rejecting an Amendment on those lines from the Opposition. It was only ac the last moment, on 8th July, that the Government brought in their own Amendment on the basis of the 35 per cent.
I suppose the Government think that they have been generous. But I consider that it is scandalous behaviour. The proposal has been before the country for two and a half months, during which period a very large number of important companies have been left in uncertainty which is now in substance to be removed. Three years ago there were 4,000 quoted companies in this country. Since then there have been 500 public issues. It is safe to say that very many, probably most, of those new issues have been family companies which have come to the market to provide against death

duties and all the complications that may arise. Not only is it an additional 500, which represents more than 10 per cent. or the companies existing three years ago, but we have to remember that from among these companies will come the very dynamic ones essential to the economic growth of the market mechanism. Some of these companies will develop into the very greatest ones of the future.

Mr. Joel Barnett: While the right hon. Gentleman is developing that point, will he tell us which types of close company will suffer by being so described? What will be the penal effect on this type of company? What is the precise penal effect?

Mr. Lloyd: I can tell the hon. Gentleman exactly. If they were close companies they would be under the surveillance of the agents of the Government and not be absolutely free with regard to their policy, distribution and so on.

Mr. Barnett: But which particular one?

Mr. Lloyd: There are many. I think that the hon. Gentleman is perhaps suggesting the point that the Chief Secretary has tried to make very often during the debates, that there is nothing wrong with being a close company at all. The point is that Englishmen like to be free, and they are freer when they are responding to the market mechanism than when they are potentially having to respond to the directions of the Revenue. This is nothing against the Revenue. We know that in the past the Revenue has administered the Surtax provisions very well, but, nevertheless, in our view it is wrong that more than the smallest number of companies should have to come under the surveillance of the Revenue. These are matters which are better left to the companies themselves to decide.
Thirdly, the Chancellor's lash is being felt by some of the very greatest companies in the country which are the buttress of our economy and our exports, and also by the smallest. It is true that he is alleviating the situation to a considerable extent, but I remain distinctly anxious about the effects of the Bill on the small expanding company. I have taken advice from accountants and I find


that in a typical small company, for example of the kind where there are two men who would have an income of, perhaps, £5,000 each, the cost of incorporation would be an extra £2,000 a year. They would have to have an income of £12,000 a year together if they were to have incomes in their own capacity, which would then be subject to Income Tax and Surtax, of the same amount.
This has been computed by one of the leading firms of accountants which is daily engaged in advising individuals whether they should incorporate themselves or not. Normally, the advice to the small man who has made a certain success is that he should incorporate himself for the advantages of limited liability, but I am afraid that in these cases the price of limited liability as a result of the Bill is very considerable.
Again I ask the question which The Times asked. Why has the Chancellor brought in this Bill which has, as I believe, all these deleterious results? The answer really is that he has a split personality. His head tells him that he should support enterprise, but his heart remains that of a Socialist. This is not personal to him—

The Chancellor of the Exchequer (Mr. James Callaghan): That is a very good combination.

Mr. Lloyd: Perhaps. I wonder whether you will think it so good a combination when I quote to you what Lord Attlee said about this very difficulty.

Mr. Deputy-Speaker: The right hon. Gentleman must not ask what I think about it.

Mr. Lloyd: The fact is, Mr. Deputy-Speaker, that you will see that Lord Attlee undoubtedly had in mind this Bill when he said:
The plain fact is that a Socialist Party cannot hope to make a success of administering the capitalist system because it does not believe in it.
That is the Chancellor's great difficulty. That was said by Lord Attlee many years ago.
The difficulty in which the Chancellor finds himself as a result of the split personality which he has accepted in regard to this Bill comes out most clearly when one is dealing with the separation of the

shareholder and the company. This is a matter with which the Chief Secretary has dealt with enthusiasm on many occasions. But it is a most dangerous development. The whole of our existing system is based upon the direct responsibility of directors to the shareholders who are the members of the company, and in so far as the Bill weakens that position it is doing something which is very dangerous, not only in regard to the development of our company legislation but also to the affairs of this House. Again and again we have sought, as a country, to fix responsibility definitely so that those concerned shall not be confused. This is extremely important in the business world.
How dangerous the alternative is can be seen by the way in which some of the economic followers of Dr. Kaldor are seeking already to exploit the situation. I have quoted from the New Statesman, where it is said that, following up the separation of the shareholder and the company, which is emphasised by the Corporation Tax in this Bill, undistributed profits should pass from the nominal ownership of the shareholders into the hands of the consumers, the workers and the State. It likes the idea.
The writer suggests earlier on that this to a certain extent should encourage the managers; but not for long, because he goes on to say that if the shareholders no longer have the right to all these profits, as for example under the Bill, this right should be transferred to other hands and not left in the control of the management, and he indicates clearly that part of this should be transferred to the State.
These are real dangers. One of the great vices with which the House has not yet found a way of dealing is the lack of direct responsibility in the nationalised industries and under this Bill we could create a separation between shareholder and director with the same confusion developing in private enterprise, resulting in a growth in the power of the State. The Bill could encourage such a process, with which we on this side wholly disagree.

6.0 p.m.

Mr. Edmund Dell: I am glad to follow once more the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) because I want to speak


about the uncertainty factor that he mentioned. Before doing so, I wish briefly to refer to certain remarks made by the right hon. Member for Bexley (Mr. Heath). He paid numerous compliments to certain hon. Members on this side of the House and more numerous compliments to his own right hon. and hon. Friends. He referred to their 700 Amendments and to all that they have done to improve the Bill.
I am a very new Member and I have been very interested to sit through the long discussions on this important Measure, which represents a major advance in tax legislation. For much of the time I have been an observer of the debates and occasionally I have intervened. But my observation of the Amendments moved by the Opposition has, perhaps not unnaturally, been a little different from that of the right hon. Gentleman.
As I have seen it, the Opposition Amendments have fallen into three main types. First, there have been amendments which would have done something different from what they intended. Secondly, there have been Amendments which would have done something directly opposed to what they intended. Thirdly, there have been the Amendments which turned out to be most important and the intention of which they did not themselves understand. Time and again hon. Members opposite explained how difficult it was to produce these Amendments, and we heard my right hon. Friends explaining how, if the speeches of hon. Members opposite indicated the intention of their Amendments, those Amendments failed to fulfil the intention.

Mr. Deputy-Speaker: Order. The only Opposition Amendments that the hon. Gentleman can talk about on Third Reading are those which have been accepted.

Mr. Dell: Thank you for your guidance, Mr. Deputy-Speaker. I want to refer in particular to the Amendments which were accepted, and it brings me to an aspect of the discussion of the Finance Bill which troubles me a little as a result of my experience here. To a remarkably great extent, the real discussions on the Bill have taken place not inside this House but outside it between the Government and the various

interests concerned. In those discussions hon. Members have had no part, although they have resulted in Amendments to the Bill.
Whether the kind of way in which the Bill has been discussed is the best way in which a major change of this sort should take place and whether full opportunity has been given for the fullest discussion of that change is something worthy of further consideration by the Government or by a body like the Select Committee on Procedure. The Government have accepted Amendments that have very often been put down by themselves—very often on behalf of outside interests—but the House itself has never had a real opportunity to take part in the discussions which led to those Amendments.
I would like to see the House having the opportunity to observe and to question the sort of discussions that have obviously been going on between the Government and the outside interests affected. If we change our system or our procedure, then we should also take the opportunity to improve major reforming legislation in a way which would make sure that, in its final form, it is better than it turns out to be under the present system.
I want now to turn to the uncertainty argument used by the right hon. Member for Sutton Coldfield. He has again argued that the result of the Bill is to put the Government at loggerheads with industry. He says that confidence has been lost, and so forth. That is an argument which right hon. and hon. Members opposite have deployed time and again throughout these discussions. I regard it as of the highest importance that the Government should have good relations with industry and the City, and I am very glad to see everything that is done to achieve that objective. I am sure that no Government can achieve the sort of economic success we desire unless such co-operation is established.
Certainly the Government must work with industry, but—and this must be understood, for it is equally important—our desire to co-operate with industry does not mean a licence to industry to continue to work in the same old way. The country is facing an economic crisis. Over a very long time it has been on the verge of an economic crisis. We have


had continual balance of payments difficulties.
There is a responsibility for this situation somewhere. I believe that, to a considerable extent, it is the responsibility of the Government who fell on 15th October, 1964, but theirs is not the only responsibility. Responsibility also rests on all sections of economic activity and industry. If industry is to say that there are not to be changes in the way in which it conducts its affairs, then I am afraid that we shall fail to achieve the sort of economic progress and increase in the rate of development that is vital if we are to put an end once and for all to the balance of payments difficulties.
Industry must accept responsibility for the problem and accept the importance of change. One thing that has troubled me throughout these discussions has been the way in which right hon. and hon. Members opposite have seemed to fail to realise this in that they have taken every brief that has come to them from any vested interest affected and, instead of examining it critically and selecting what was right, have, irrespective of its merit, deployed its arguments as though they were the Law of the Medes and Persians.

Mr. Anthony Barber: I hope that the hon. Gentleman will accept it from me that that is not true. Innumerable representations have been made to my right hon. and hon. Friends and to me, and many of them have been rejected.

Mr. Dell: In view of that statement by the right hon. Gentleman I, of course, withdraw my statement in the form in which I made it. Nevertheless, I would say that many of the representations which they have made on the Floor of the House have shown a quite inadequately critical attitude towards the representations that they have received. Perhaps they did reject some of the representations they received, but they have argued cases which, in my view, have been indefensible. One of the prime examples of this unselectivity—this uncritical attitude—towards arguments which have been placed before them by outside interests has been their attitude to overseas investments.
I was extremely interested to hear the argument which my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) put forward about overseas portfolio investment earlier this afternoon. Throughout these debates I have listened with extreme interest to the many interventions of my hon. Friend.

Mr. Geoffrey Lloyd: So have we.

Mr. Dell: Hon. Members opposite have also listened to my hon. Friend, but I sometimes wonder what their attitude would have been if my hon. Friend had had the opportunity to introduce his wealth tax. It might then have been slightly different.
The argument put forward by my hon. Friend about the importance of overseas portfolio investment was an interesting one, which deserves examination. Unfortunately, as he said, at the moment it is not a practical step for this country to take, because the real situation that we face is not one of building up our reserves and discussing in what way we should hold them—whether in gold, dollars or overseas portfolio investments. The real situation that we face at the moment is that of having to get even into a permanent condition of balance. Once we have got into that condition, once we have the prospect of building up the sort of surplus we need—I do not mean the sort of surplus that the Germans have, but some sort of surplus—we shall be very interested to discuss the suggestions which my hon. Friend has put forward this afternoon. Meanwhile, the rate of growth of this country depends upon a much higher rate of investment, and it will be a long time before we have a sufficient rate of investment and growth.
One of the things that we should realise if we are to achieve a sufficient rate of investment and growth is the importance of investment in this country, even if it means cutting down the rate of investment overseas for the time being. I was interested to see an article in the Economist of 27th March—I forget whether it was before or after the Economist so drastically changed its views on these matters—which said:
The instinctive defensiveness that greets any practical suggestion to restrain private investment abroad as a root and branch attack on the City's overseas investment activities as a whole is surely outmoded and will, in the


long run, only increase the influence of those critics who really do want a root and branch upheaval.
I am not one of those critics who want a root and branch upheaval. I have never denied that overseas investment can lead to an improvement in this country's exports and balance of payments. Not merely have I never denied it, I have asserted it. But we have to consider the evidence, which is in two forms. First, there is the evidence of the state of continual balance of payments crises and, secondly, the evidence that the sort of direct overseas investment that this country has been conducting has not contributed as it should to the improvement in this country's exports and balance of payments. In fact, our exports have increased most where we have invested least.
The right hon. Member for Sutton Coldfield mentioned the situation in Chile in the 1920s. I am ashamed to find any right hon. Member mentioning a fact about Latin America with which I am not acquainted, but I was not acquainted with this fact about Chile. I take it from him, and I was very interested to hear it. But if he looks at the current situation he will find that it is entirely different, and that whereas, between 1959 and 1963, we sent between 45 per cent. and 46 per cent. of our investments to Australia, Canada, India, New Zealand and South Africa, and our exports to those countries during that period increased by 7 per cent. our exports to the E.E.C. countries increased by 77 per cent. whereas their share of our investment overseas was only 11 per cent.
If we have to use overseas investment as a means of increasing our exports—and I do not deny that this is one method of doing so; on the contrary, I assert that it is a method—we have been deploying our overseas investment wrongly. One of the great advantages of the Bill is that it will lead firms to reassess their overseas investment policies so that in the future we invest overseas more intelligently than we have in the past. Instead of using overseas investment aggressively to open up new markets we have used it defensively to protect old markets. We have invested enormous sums in countries where the markets have either been stagnant or have been growing very slowly, and have neglected opportu-

nities for overseas investment where they would have resulted in an improvement in our balance of payments and export prospects in total.
I am sorry that the right hon. Member for Bexley has left, because I wanted to refer to something that he said in reply to me in the debate on 16th June, when he went as far as any hon. or right hon. Gentleman opposite has ever gone in admitting the case which I have attempted to argue in this House during the progress of the Bill. He said:
I have been intrigued, as the hon. Member has been, by the difference between American experience in investment abroad and the effect on American exports and British experience.
I was arguing that it appeared to me, on the basis of the figures available, that the Americans had used this weapon very much more successfully than we had. The right hon. Member for Bexley evidently agreed with me. He said:
I believe—and this is a factor which was not mentioned by the hon. Member—that a considerable amount depends upon the industrial structure of the two countries.
He said that this factor had not been mentioned by me. It is true that on the occasion of the speech to which he was referring it was not mentioned by me, because, following the example of hon. Members opposite throughout these debates, I did not want to be guilty of tedious repetition. I had made this point in the Second Reading debate. That is why I did not repeat it on 16th June. The right hon. Gentleman went on to say:
It does not always happen … that when capital is invested abroad, this country is the best place from which to get machinery, and particularly sophisticated machinery. This is not a factor or feature of investment. It is much more a characteristic of the industrial structure of this country compared with other countries."—[OFFICIAL REPORT, 16th June, 1965; Vol. 714, cc. 563–4.]
In other words, the right hon. Gentleman accepted that, following our overseas investment there has not been the flow in commodities—machinery parts and so forth—that appeared to follow United States overseas investment. I would put the reason for this rather differently than it was put by the right hon. Member.
If a country has enormous resources—as the United States has—and if it can build up a wide range of exportable capacity at home and still invest abroad


on a large scale, it is likely that its overseas investment will have a beneficial effect upon its exports. But if one has to choose because one's resources are stretched and sparse, then I should say that such overseas investment as is undertaken must be passed through a very narrow sieve to ensure that its effect on the balance of payments is what is desired. One of the things which my right hon. Friend is ensuring, outside the sterling area, is that this will in future be the case. Unfortunately, and this I think is a gap in his programme, the same criteria do not apply inside the sterling area. To a certain extent this gap is filled by Corporation Tax, because of the additional tax which overseas investment, even in the sterling area, will have to bear. But whether it is sufficiently filled by Corporation Tax is something which I believe my right hon. Friend will have to consider.
I was reading the other day that the outflow of long-term capital in the first quarter of 1965 was £90 million. Admittedly, Corporation Tax is not yet in operation, but if the flow of long-term capital overseas is still continuing at this sort of rate, I think that is something which the Government will have to consider very seriously. In the course of the debates on the Finance Bill I have been fortunate enough to be able to discuss some of these matters with industrialists outside the House, and I would like to refer to one argument put forward by one of them against the policy which my right hon. Friend is adopting.
The argument was not perhaps a very complimentary argument as far as British industry is concerned. It was that the trouble with British industrialists is that they are insufficiently ready to take risks. Overseas investment is the one sort of risk that the British industrialist is ready to take. Why not encourage him to take risks rather than stop him? I think that one of the troubles is that we have not been prepared to take the right sort of risks. We have defended established markets which we knew existed abroad, whereas the real risk for industrialists in this country, which should, I believe, have been taken, is the risk of building up in this country capacity which can be used for exports. This was an argument which was deployed recently in an article in

one of the bank reviews. We need in this country, to a much greater extent than we have ever achieved it in the past, a surplus capacity available for exports, and I feel that if we set our sights on that object, far more than on the object of investing abroad, the total result to the economy would be very much more satisfactory than it has been.
One argument which has been used, and to which I would like to reply, is that my right hon. Friend has agreed to co-operate in the inquiry which is taking place under the auspices of the Federation of British Industries—an inquiry into overseas investment and the return to this country's balance of payments from overseas investments—and yet has introduced Corporation Tax, before that inquiry is finished.
I think that the answer to this argument is very simple. The inquiry is important, and I pressed for it. But it is necessary to be clear on the objects of the inquiry. In my view, these are to establish the criteria which should govern this country's overseas investment. The object of the inquiry is not to stop the reduction in overseas investment, which is vitally necessary if this country is going to invest sufficiently at home and to achieve balance abroad. On a whole variety of questions industrialists have to think and plan anew. They have to rethink how this country's economic affairs should be conducted. Overseas investment is one example of this.
There is one matter which I think is of vital importance, upon which the Government must rapidly come to a decision. I have spoken of the importance of building up a capacity in this country available for exports. This can only be done by increasing the rate of investment at home. I think that the Government must very rapidly frame a programme of effective investment incentives. It is quite clear that the existing investment incentives have been far too indirect in their effects. We have had reports which have led inevitably to this conclusion. They obviously have had an effect. They have, as a result of reducing tax payments made by companies, enabled those companies to finance the investment programmes which they had contemplated. But their effect has been far too indirect. We need investment incentives that will act directly on programmes of firms and


will directly encourage them to plan the sort of investment which will rapidly modernise this country's economy, and rapidly build up the capacity which we need to export, and a lack of which is at the moment one of the main factors in holding back the increase in our exports, as many industrialists have pointed out. I hope that the Government will not be long in preparing that programme and in coming forward with the necessary announcements as to what they plan to do. We are making demands on industry and I think this is something which industry can legitimately demand of the Government.
The Bill is one which makes enormous and beneficial changes. One of the criticisms made of it is that it exhausts this country's capacity for change for little economic advantage. This is a criticism which has been made in the Economist and a criticism that I saw recently made by an eminent professor of economics. This country will need to have a large capacity for change. A very distinguished person said the other day in graphic words, "The wolf is at the door". If we are to repel the wolf from the door we will need a large capacity for change. To suggest that a Bill like this exhausts our capacity for change is a counsel of defeat. Admittedly, not everything can be done by taxation, but there will be many other measures from the Government, which they are now bringing into play, to correct our economic situation. But if the critics really believe that our capacity for change is so sparse, then that alone is sufficient reason for abandoning such timid counsellors and following those who at least have faith in the future.

6.29 p.m.

Sir Alexander Spearman: I would agree with the hon. Gentleman the Member for Birkenhead (Mr. Dell) about two things, relating to the changes and in the need for more industrial investment. It is perhaps my main complaint about the Government's economic measures that I believe they will lead to less industrial investment. We have had, as always a very interesting speech from the hon. Member for Manchester, Cheetham (Mr. Harold Lever), this afternoon. I think that we all enjoyed, at any rate on this side of the House, his many interven-

tions in Committee and on Report. He frequently asserted his loyalty to the Government, but we knew that whenever he said that he would make a particularly relentless and formidable attack upon the Bill.
I remember that on one occasion the hon. Gentleman said:
It is helpful to a Government to defend them from the more serious charge by making them plead guilty, however reluctantly, to the lesser charge.
[OFFICIAL REPORT. 2nd June, 1965; Vol. 713, c. 1777.]
He was really making a plea, "Forgive them for they know not what they do. They are fools and not knaves". That is a defence which will not be very encouraging to marginal voters when the election comes.

Mr. Harold Lever: That comment was made about what I conceived to be an imperfection in the Bill which was very handsomely and completely put right later by the Chancellor of the Exchequer.

Sir A. Spearman: There was certainly little limit to the number of imperfections which the hon. Gentleman saw in the Bill.
When the Chancellor of the Exchequer outlined his Budget proposals, more than three months ago, they were not taken too badly in the country. Even those whose pockets were adversely affected felt that, though they might not lead to much progress, they would not do much harm. Since then, two things have happened: first, the right hon. Gentleman's intentions have been spelled out in the Bill; and, secondly, the Bill has been torn to pieces by my right hon. Friend the Member for Bexley (Mr. Heath) and the brilliant team on the Opposition Front Bench. I have taken a very modest part in 28 Finance Bills and I have never known such an effective attack by the Opposition on a Finance Bill, or an attack which has been so effective in the country.
It is clear that the fiscal measures in the Bill are not sufficient to damp down the inflationary pressures. Therefore, the Government, to a very large extent, are depending on their monetary measures. This is a very extraordinary policy for a Labour Government who never, in all their years in opposition, ceased to criticise the Conservative Government for very much milder doses of


the monetary weapon. It would be out of order, during the Third Reading of a Finance Bill, to expand on the monetary measures, but perhaps I might say, in one short sentence, that the objection which I have to excessive dependence upon a credit squeeze is that it affects industrial investment rather than consumption and takes dangerously long to act.
This year this Bill, plus the credit squeeze, clearly has not damped down excessive demand. Opinions differ about what will happen next year. There are those who believe that demand will go on rising and, therefore, that wages will go up much more than production with a disastrous effect on the balance of payments. My own guess, for what it is worth, is that we shall have a recession in spending next year and that it will be sparked off by a sharp decline in industrial investment due partly to the credit squeeze and partly to this Bill, but not in the way which the authors of the Bill intended but because of the uncertainties which the Bill creates.
The Government are in a very great dilemma. If there is no recession in spending, inevitably they face an acute balance of payments crisis. If there is a recession in spending, they face severe unemployment. When the application of the brakes is delayed a long time, as has happened in this case, then they have to be applied far more severely. Consequently, there will be a much greater degree of unemployment than would otherwise be necessary, and that is a direct responsibility of the Government. The only consoling thing that I can say is that experience shows that after a recession there is a lag in the rise in unemployment of several months. It may be that the Government will have time to run away. It will not be the first time that a Labour Government have done that.
On Third Reading, it is relevant to examine the Bill as a whole and the methods proposed for raising revenue. The National Institute, in its May issue, contained an article by Mr. Hopkins of the Treasury and Mr. Godly of the National Institute, which said:
When a Government changes tax rates, their main purpose is usually to alter the general level of demand.

The Government appear to have rejected this advice. Night after night, as I listened to Treasury Ministers, it seemed clear to me that they had lost sight of the prime need to regulate the economy because they were obsessed by the problem of how to raise revenue and how to catch tax avoiders. All Chancellors of the Exchequer pay much too much attention to how much revenue they can get and much too little attention to how they get it.
Table 9 in the same issue of the National Institute's publication shows that if insurance benefits of £300 million were paid out and contributions of £300 million were levied so that the Treasury were unaffected, the effect on demand in the second year would be an increase of £223 million. If, as may be the case, some of the taxes proposed in this Bill would raise a revenue of £50 million and deter spending by £10 million, they would be very bad taxes. But if, as other taxes might do, they raise only £20 million and detered spending by nearly that amount, they would, in present circumstances, clearly be far better taxes. I cannot expect the Chief Secretary to accept this Keynesian view, because only last week he told us that what Mr. Gladstone said in 1884 was good enough for him in 1965.
I understand that before the election the Prime Minister wrote an article supporting a Corporation Tax on the basis that it would transfer the tax burden from the consumer to the shareholder. That is virtually impossible. If there is excess demand, inevitably either the spender is deterred by higher taxes or prices go up, and it is a very much more painful process for the consumer if it is done by prices going up. Taxes which come out of savings serve no economic purpose whatsoever. It would make—it might be the political purpose to do so—the rich poorer but it would not take the country richer, except perhaps accountants and lawyers, who will certainly be enriched by this Bill.
I believe that the Bill has two main themes. The first is to catch every tax avoider. Of course, it is a good thing to stop all avoidance of tax within reason, but not regardless of cost to the collector of taxes or of cost to the innocent taxpayer. As my right hon. Friend


the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) said, institutions all over the country are having to spend time unproductively and money in taking on new clerks to deal with their accounts because of these new taxes. They have no intention whatsoever of avoiding tax.
If the Government go on with these sorts of measures, they may achieve the exact opposite of that at which they are aiming. We as a country have a very good reputation in tax avoidance. Our record is a great deal better than that of many other European countries. If, however, we go on with these sorts of measures, we may well find that they make the country into a nation of tax avoiders. I remind the Chancellor of what a great Roman said 2,000 years ago. "When I was very young", he said, "there were very few laws and there was very little crime. Now, there are a great many laws and a great deal of crime."
The other main theme is the determination to make startling tax changes for what appear to be purely party political purposes without due regard to the economic consequences. These are causing an immense dissipation of energy in Government circles, in the Civil Service and in industry and commerce. Surely, 1965 is the last year when we can afford that waste of energy.
I know that the Prime Minister has a fine memory. I wonder whether he can remember, as I can, Lord Attlee saying in this House on 6th August, 1947:
I would agree that it might have been better if we had had a greater concentration of effort. It may be we have tried to do too much in a short time."—[OFFICIAL REPORT, 6th August, 1947; Vol. 441, c. 1489.]
I wish that the Chancellor could have remembered and listened to those words.
In 1931, there was, I suppose, less confidence abroad in the Government of the day than there had been in any Government in modern history. Today, however, the Government have broken that record. The loss of confidence in the Government overseas is something which they have achieved to a far greater extent than in 1931 and much more quickly. The Chancellor of the Exchequer has been a personal friend for as long as he has been a political opponent. I find it hard to think that he is personally responsible for this unhappy Finance Bill. If I may misquote, the

voice is the voice of Callaghan, but the hand is the hand of Wilson.

6.42 p.m.

Mr. A. E. P. Duffy: I also, would like to add my congratulations to those which have been offered to my right hon. Friend the Chancellor of the Exchequer and to his colleagues the Chief Secretary and the Financial Secretary to the Treasury, not merely on the character of this great Finance Bill, the greatest Finance Bill that the House of Commons has known since the great Bill of 1909, but also on the manner in which they piloted it through the Committee.
I also offer my congratulations, if they are acceptable, to the Opposition, and especially the Opposition Front Bench, for the way in which they have opposed the Bill. The right hon. Member for Altrincham and Sale (Mr. Barber) and his colleague the right hon. Member for Bexley (Mr. Heath) led a powerful team, backed up by obviously good and thorough staffwork. On many occasions I envied them. They were well briefed and were well supported by their colleagues, not all of whom are present but some of whom deserve to be mentioned.
They include the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), the hon. Member for Worthing (Mr. Higgins), who has only just left the Chamber, the hon. Member for Barkston Ash (Mr. Alison), all of whose speeches I enjoyed tremendously, and, of course, the sterling qualities of the hon. Member for Ormskirk (Sir D. Glover), which were displayed night after night, as we expected they would be, and the hon. Member for Louth (Sir C. Osborne), together with the hon. Member for Shipley (Mr. Hirst), a fellow Yorkshireman.
I am sorry that the hon. Member for Shipley is not in his place, because I wanted him to know as well that we appreciated the contributions made by him and his colleagues and that we were sorry that they could not resist taunting us on some occasions because we would not speak. Why should we compete with them when we enjoyed listening to them?
I agree with the right hon. Member for Bexley. I shall be lonely in the weeks to come without the Bill. I have already fallen foul of some of my reforming colleagues because they suspect that


I do not want to see the Committee stage of the Bill sent upstairs. They have put words into my mouth, but I fear I must say to my hon. Friend the Member for Fife, West (Mr. William Hamilton) and my hon. Friend the Member for Woolwich, West (Mr. Hamling) that there may be something in their suspicions.
I thoroughly enjoyed the Committee stage of the Bill, long though it was. It really has not been too long for me. I enjoyed it not least because of the speeches which I have heard from hon. Members opposite. Most of them have been very good speeches, not merely well worth listening to, but well worth reading and rereading.
I already have my own two collections of all the copies of HANSARD which put the Committee stage on record. But because I have reread the Committee stage of the Bill, it also needs to be said—this is something that hon. Members opposite can easily check, and I hope to be told if I am wrong—that my own colleagues on the Front Bench have always given as good as they received.
On the really big questions which have worried me, as I said on previous occasions here in November and elsewhere on television and as I repeated in the Budget debate, and again on Second Reading, I had worries about the effect of Corporation Tax, notably on investment. I was not wholly convinced by the arguments on behalf of retention as opposed to distribution. I was worried because of my conversations with some of my colleagues about the possible effect of Corporation Tax on overseas investment and I was not clear about the effect of both on our balance of payments. I was especially worried about the effect of the Corporation Tax on investment allowances. Therefore, I listened with the greatest possible care to the arguments in Committee. And I am bound to say that my Treasury Bench colleagues had the edge on the Opposition arguments.
I am not wholly satisfied yet. That is why I specially welcome the inquiries which, it seems, are likely to take place concerning two of these problems and the private inquiries that some of us are already setting afoot. Some of us are already thinking in terms of Recess work. We still have open minds on some of the

ways in which the Corporation Tax is likely to operate.
My colleagues who have already spoken from this side today have admitted that there must be unforeseen side effects from the Corporation Tax. We are as well aware of this as are hon. Members opposite. I hope that right hon. and hon. Members opposite will agree that if they have done sterling work in opposition, the Treasury Bench has done sterling work in seeing the Bill through. In years to come, many of them will look back with nostalgia upon recent weeks. We will certainly talk with pride about the part we played. I regard it as a personal distinction to have been associated with such a Bill, this great measure of reform.
I was glad to hear the right hon. Member for Bexley say that he was not opposed to the Capital Gains Tax and the Corporation Tax. In so far as he was speaking for the "shadow" Cabinet. I unhesitatingly accept that. Before, however, the legend is established that that is the unanimous view of all his colleagues, let me remind hon. Members that similar sentiments are expressed about the Health Service. Hon. Members opposite are all now in favour of the Health Service despite the events of recent days. I heard hon. Members in the Conservative Party say in the 1950s that they were in favour of the Health Service, although I distinctly remember reading that some of them strenuously opposed its introduction.
It needs to be put on record that some hon. Gentleman opposite take a different view from that taken by the right hon. Member for Bexley. They do not want the Corporation Tax at all. They are not prepared to accept it now in the hope that it will be modified in a year or two. They simply do not want it.
The evidence for that is to be found in HANSARD. On 2nd June, the right hon. Member for Orkney and Shetland (Mr. Grimond), when we had that great debate on Corporation Tax, asked what the acceptance of the Amendment which was under consideration would mean to hon. Gentlemen opposite and whether, if the application of the tax was postponed, the Opposition would regard it as binding on them. He said:
Suppose they were the Government next year, would they regard themselves as bound to go with this postponement?


HANSARD records hon. Gentlemen opposite as saying, "No".—[OFFICIAL REPORT, 2nd June, 1965; Vol. 713, c. 1754.]
Those who were here that evening will remember that most hon. Gentlemen opposite on the back benches said "No". It is true that not more than a dozen were present, but I was impressed with the thought that the qualification needed to be made before the legend was established that we were now all for the Corporation Tax.

Mr. J. Bruce-Gardyne: Would not the hon. Gentleman agree that my right hon. Friend the Member for Bexley (Mr. Heath) made it quite clear earlier on today that he would not accept Corporation Tax in its present form, and is not this the common view of hon. Members on this side of the House?

Mr. Duffy: I do not question that the right hon. Gentleman said that. In fact, I thought that I had made that clear, but, equally, the Leader of the Liberal Party asked hon. Gentlemen opposite whether they would accept the Corporation Tax in any form if they were to come back as a Government in a year's time, and some said, "No".
There are two tests which I should like to apply to the Corporation Tax, because this is the part of the Bill about which I wish to speak. There is not time to dwell on more than one aspect of it. First, to what extent will Corporation Tax make for efficiency and growth? Secondly—and this has not been said yet—how far does it relate to the Government's other measures for modernisation? I want to apply those two tests to the Corporation Tax, because I think most hon. Members will agree that it is the cornerstone of this Budget and of this Bill.
The first thing that appeals to me about the Corporation Tax is the way in which it introduces a much-needed element of flexibility into our tax system. Hitherto, it has been neutral as between the company and the individual, and as between saving and spending. As a result, it has failed to have much impact in ensuring a better use of our resources, or in galvanising our industrial effort to achieve a faster rate of growth.
The fact that the change-over will favour some companies, the fact that the reaction to it has been varied, and the fact that it has been discussed in Moodie's Review, quotations from which were given to the House earlier this afternoon by the Chief Secretary, shows that some companies will benefit, while others presumably will not, and I regard that as its outstanding merit. A number of advantages must stem from it which are relevant to the objectives of growth and efficiency. My right hon. Friend referred to some of them this afternoon, and I shall not repeat them. It is clear that the new tax may provide a strong incentive to some companies.

Mr. David Mitchell: Would not the hon. Gentleman agree that it also penalises the growth of small companies which need outside money to expand because they cannot produce sufficient from their retained earnings?

Mr. Duffy: It may do, and I said so last November. In fact, that is one of my private worries about this tax.
Yet during the last few days a lot of evidence has come forward to suggest that small companies will not be hit as hard as some people thought they would be. Indeed, some people now think that the small companies will get off pretty well. The point is that the new tax may provide a strong incentive to cut costs and increase efficiency and productivity, and this is the first test that I apply to it.
In so far as this is true, it can, as my right hon. Friend the Chief Secretary said, make an important contribution to a faster rate of domestic economic growth. Yet the tax has encountered fierce opposition, not merely in this House, but elsewhere. So I propose briefly to consider some of the features of this new tax which have been regarded by its critics as particularly obnoxious.
I have mentioned one already, but I intend to mention it again because I am reminded of it by the hon. Member for Basingstoke (Mr. Mitchell), who has just intervened. It is suggested that the Corporation Tax will hit the small man, and that it will frustrate and confuse other businessmen. I am interested in this reference to the small man. I cannot help feeling a little sceptical when I hear these frequent emotional references to the small man. I am reminded


of something that the Leader of the Liberal Party said about such frequent references in Committee to the small man, who, he thought, was a curious homegrown dwarf comparable only to the gnomes of Zurich.
When we are not making appeals on behalf of the small man, we are making appeals on behalf of the developing countries. We do not make appeals on behalf of businessmen as such, or on behalf of overseas investment as such. We make appeals on behalf of small businessmen, and on behalf of developing countries.

Mr. Peter Bessell: Has the hon. Gentleman given my right hon. Friend notice that he would refer to what he had said?

Mr. Duffy: I was agreeing with the right hon. Gentleman. I cannot understand why the hon. Gentleman should think otherwise. I was sharing the scepticism expressed by the right hon. Gentleman about these frequent appeals on behalf of the small man.
I do not think that all businessmen are the rational economic creatures of the textbook, the kind of people on whom I was brought up at the London School of Economics. If they cannot make use of a new and simplified, although differential, tax to the best advantage—and, moreover, a tax which has been in use in other countries, notably the United States, where it has been in use for half a century—we ought not to be concerned about their survival.
Secondly, we are asked to consider whether companies which retain profits are expansionist, and will not the new tax, asked the right hon. Member for Bexley during the Second reading debate and again in Committee, affect them? Many other people have shared the right hon. Gentleman's doubts whether such companies are necessarily efficient and expansionist. I have some sympathy with those concerned, though I cannot go all the way with them because there is not sufficient convincing evidence of any correlation between distribution and growth. I think that the arguments slightly favour between retentions and growth. Certainly, the evidence that is available points to the bulk of firms

nowadays getting most of their additional capital for growth out of retained profits.
It is said that the new tax is undesirable because there will be more investment if there are higher savings. It is true that personal savings have been high in recent years, but, expressed as a percentage of disposable personal income, they have been on something like a plateau since 1961. More recently, the figures have been declining. I cannot believe that the right hon. Gentleman was asking us to accept that this was attributable to Corporation Tax. It is much more likely to be due to increased taxes. Investment will be affected in any event, said the right hon. Gentleman because of the way in which new taxes will scale down investment allowances, but will investment suffer as a result of the tax?
It is not true that the Chancellor has acted, as was alleged, without a shred of evidence, because, long before Corporation Tax was mooted last autumn, there were those who entertained most serious doubts about the way in which tax relief was having an effect, if it was having an effect at all, on investment decisions. Many projects were already afoot in academic circles on those lines. I welcome the study which has been announced, and other studies which are being undertaken privately.
I hope that those who are concerned in this matter will bear two things in mind. First, there can be no means by which tax can be payable without a corresponding investment and no doubt the Treasury will watch the operation of a 7 per cent. investment charge in the United States. There, I am told, 7 per cent. is immediately deductible for the years immediately before the tax bill. Secondly, there is something very potent in the directness of the tax cut. The tax cut should be as generous as overall budgetary conditions permit, because apparently there is under-investing relative to major competitors.
The tax is also criticised on the ground that it is a threat to overseas investment. I cannot go into that because we have listened recently to my hon. Friend the Member for Birkenhead (Mr. Dell), who has spoken with as much—some would insist more—authority than anyone else in Committee on this matter. I think most hon. Members would agree, in view of what he said and what he has repeated,


that we are entitled to the stance we have adopted on this subject.
This does not mean that Corporation Tax will not have painful effects and perhaps harmful side effects, but the June trade figures cannot leave hon. Members in doubt that radical measures are required if the British trade structure is to be equipped to compete in the modern world. The overriding objective of the tax in common with all the Government's current proposals in the economic field—I am glad that no one has taken a contrary view in this Third Reading debate—is not restriction, but expansion. This is true of the Government's related measures. It is true of the incomes policy, where productivity is now recognised as an essential condition.
It is true, also, of the Government's approach to the private sector where the intention is to encourage vigorous competition. Hence the recent legislation on monopolies and mergers. And the publication of the national plan, in mid-September, will give the public and private sectors the overall design they need. Above all, it is recognised that higher investment and increased efficiency and a faster rate of economic growth are just as essential as the need to tackle the unfairness and inequity of the tax system. Hence the inclusion of the Corporation Tax as well as the Capital Gains Tax in the Bill.
I am sorry to end on this note. If hon. Members opposite take a different view no doubt they will say so, but there is no evidence that the policy-making that is going on in Tory circles has yet reached this point. Does this mean that hon. Members opposite are satisfied with present methods of investment, efficiency and economic growth? If not, what steps do they propose to boost them. Because the whole underlying purpose of the Bill is to do precisely this. I therefore hope that its passing will be widely welcomed in the country.

7.5 p.m.

Sir Peter Roberts: Later in my speech I shall come to what the hon. Member for Colne Valley (Mr. Duffy) has said in regard to Corporation Tax. With most of what he said I agree. First, I wish to go back to something said by my right hon. Friend the Member for Bexley (Mr. Heath). It is that, in his view, the budgetary effects of the Finance

Bill have not had a real weight on the financial position of the country at present.
If one looks back on most Budget debates one sees that the whole object of the Budget is to influence inflationary or deflationary tendencies in order to make the economic factors work. In the debate this afternoon much time has been taken dealing with the reform aspect of the Budget and I want to take some time on that. But we should emphasise that it is astonishing when one reads the objectives which the Chancellor set out in his Budget speech and what he hoped that this Budget and the Budget in October would achieve.
But there has been little effect. The inflationary rise, so far as I can see, is continuing. We have had a 7 per cent. Bank rate for considerably longer than under the Conservative Government, but against the rising demand of wages and prices this has had very little effect. If we had not spent so much time on the reform aspect of this Budget we would have spent more time in this debate pointing out how little control the Budget has had on the inflationary situation.
I come to some of the other aspects of the Bill. We have had some discussion this afternoon on the views on the Capital Gains Tax and Corporation Tax. I have always opposed the principle of a Capital Gains Tax, even when the Conservative Government brought one in, and especially now that it has been extended. I go further and say that I have not been happy about the increasing burden of Estate Duty, for the economic reason that we are taking capital and spending it as revenue. That is the reason why I object. We, of course, have to redistribute wealth, but my objection to these three forms of tax is that we take capital and spend it as revenue.
In the long run this must be wrong. I put forward an idea which may be novel. I remember when Sir Stafford Cripps first talked about above-the-line and belowthe-line expenditure. It would be a sensible thing if the capital tax taken year by year out of the economy could be set against a capital fund so that that fund could be used in capital development by the Government. My fear is that if we continue to draw off increasing amounts of capital in this way it will be spent as revenue. When the Chief Secretary was talking about distribution in relation to


Capital Gains Tax, he said that it might be spent—it was not saved but spent. My objection to Capital Gains Tax is that it is not saved but that the Government spend it, and inflationwise I see very little difference in private spending or Government spending.
I think one must say something about entertainment expenses. In so far as the taxation provisions relating to directors' expenses are aimed at creating better labour relations between management and men, I welcome them. In so far as they are aimed at making management more efficient, I welcome them, but if the motive is to put this legislation as a piece of Socialist sour grapes, I think it is wrong. Basically, I think, it is put forward from the better motives, but I think it will lead to a great deal of administrative difficulty. I do not think it will raise much money, and I think it may be abused.
Turning to Corporation Tax, I wish to refer to something which has been said by a number of hon. Members opposite, including the hon. Member for Colne Valley. I would not wish to see Corporation Tax become a political issue across the Floor of the House. I do not think it is. I believe the views of both sides stretch across the House. I merely say that it would be a pity if Corporation Tax were to become a political issue. From the industrial point of view, from the point of view of development, management and the general prosperity of the country, my experience is that those firms which plough back their assets fructify more than those which do not. Obviously, it goes both ways, but, in the main, I believe that what I have said is true.
If we go back 20 or 30 years, and only 10 years in the case of America, great advancement is seen to have come from those companies and men who have used what they have earned to improve their business. As recently as 10 years ago it was considered respectable to have one's dividend earnings covered three or four times, but there has been a tendency within the last 10 years for directors to increase their dividends covered only 1·3 times. This has become respectable. Ten years ago I do not think people would have regarded 1·3 times as respectable, but many people think it is today.
This is for three reasons, and I think it is important to appreciate what motivates various companies in various ways. The first reason is the fear of nationalisation in some industries, and companies have been taken over on a Stock Exchange valuation. There has been the tendency to increase the Stock Exchange valuation in order to improve the compensation of nationalisation. Secondly, companies with large assets but small dividend payments are sometimes termed "ripe for take-over", and directors have been forced to increase their dividends in order to keep up their values. Thirdly, those companies which wish to go to the market to raise new capital find that the market looks to yields rather than to assets.
This has rather astonished me. Take a company which is earning £100,000. Its assets may not be very much—perhaps £20,000 or £30,000—but because of the high yield, people will offer a high price. This is not fundamentally good for the growth of British industry.
Corporation Tax and the concept of that tax will have the effect of making people look to assets more than to earnings. If that is so, I think it is a good development. Therefore, I hope this will not become a political issue. Anybody who takes the view that we should go back to some of the principles which applied under the old Income Tax Acts will be making a mistake.
I was glad to hear my right hon. Friend the Member for Bexley say that we on this side of the House are prepared to look at these taxes and see that they work. Much of what my right hon. Friend and others have said from this side of the House leads me to believe that it is not likely that we shall abolish Corporation Tax. But that does not mean there are not a lot of things to be dealt with. I believe there are. I believe that the period of time which has been given in which to rethink the overseas investment points will be usefully spent. I believe that much reconsideration can take place in seven years.
I think the Corporation Tax will be acceptable if it is imposed on the 35 per cent. basis. I do not agree with a 40 per cent. basis, and I believe the Chancellor of the Exchequer made a fundamental error when he referred to "35 per


cent. or 40 per cent." and said that companies had better take 40 per cent. into account in their calculations. We have seen the Government retreat from this figure, and I am delighted they have done so, inasmuch as they have said that they did not mean 40 per cent. and that there are quite a few percentages between 35 and 40 per cent.
When I am considering some of the accounts of companies of which I am chairman I shall attach a note to the accounts stating that I am reserving a figure of 35 per cent. It is wrong for us to be bullied or frightened into believing that we should consider 40 per cent. I shall certainly quote what hon. Members opposite have said if my auditors query my action. We would be unwise to open the doors unnecessarily wide and make hon. Members opposite think that we have accepted an increase of nearly 5 per cent. on this tax which will obviously be unnecessary when next spring arrives. Be that as it may, I feel that we have made a courageous start along the right road.
I wish to conclude by quoting what my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), when he was Chancellor of the Exchequer, said on 17th April, 1961. He said:
… I wanted to have one system of taxation for companies, instead of two … I would not be deterred by the difficulty … that the companies tax might become lower than the standard rate of Income Tax … I intend to have these difficulties examined before the next Budget."—[OFFICIAL REPORT, 17th April. 1961; Vol. 638, cc. 802–804.]
I was encouraged when I heard those words. In 1962 my right hon. and learned Friend said he believed that in principle it was a good thing to unify.
I do not believe this Budget has had the proper effect on the economy that it should have had. I believe it is a mistake. The Capital Gains Tax is something which I could not support in principle and, therefore, I shall oppose the Third Reading of the Bill. Nevertheless, I shall hope to see further improvements made to it when we as a Conservative Government return to power very soon.

7.19 p.m.

Mr. William Baxter: I listened with interest to the speech of the hon. Member for Sheffield, Heeley (Sir P. Roberts). He has gone a fair distance along the direction that we want him to travel. However, I do not

want to deal with every detail in his speech, although I may refer to some of the points as I proceed.
I agree with the right hon. Member for Bexley (Mr. Heath) on one or two of his points, especially when he complimented my right hon. and hon. Friends on the Front Bench for the able way in which they have carried out their duties and responsibilities, and the exceptional ability of the Chancellor. I underline the word "exceptional", because there are many people of ordinary ability but there are few people of exceptional ability. Indeed, he took the very words from my mouth in saying that the Chancellor has shown extraordinary ability in bringing the Bill before the House.
The right hon. Member went on to say that there was nothing in the basic principles of the Bill to which he took fundamental exception. I would go a long way with him in general agreement with that. He said that the Bill had had a long and interesting journey in its passage through Committee and the House and that a considerable time had been required to examine its proposals in Committee. It is true to say that a great many sensible suggestions and criticisms have been made from both sides and also some unproductive and not so sensible criticisms, though there were more of those from the Opposition side than from this side of the House.
It would have been strange to me if a Measure of such magnitude and far-reaching implications had not aroused considerable discussion of its fundamental principles and the steps necessary to match the Bill with the requirements of this age. It would have been unreasonable to expect the Bill to have been passed without substantial alterations. It struck me forcibly during our debate that the time has come when we should reconsider the whole question of financial policy and budgetary statements. There must be a new conception and approach. I think this for many reasons, not the least being that our debates have shown quite clearly the trend of political thought and action which has underlined the political parties over the last 30 years or so.
I am amazed when I listen to the right hon. Member for Bexley and even the hon. Member for Heeley, giving some approval to an incomes policy, to a


Capital Gains Tax—although with reservations—to measures dealing with expense allowances and to the Corporation Tax. This would have been completely revolutionary talk 30 years ago and any member of the Conservative Party who propounded such ideology then would have been expelled from the party and could never hope to become its leader.
During the debates on the Bill we have heard the culmination of domestic political thought and action and the realisation of the importance of facing the realities of the day instead of the indecision which has so long permeated our thoughts and action in the past. Most people of all political parties have come to realise that certain aspects of our domestic and foreign policies must be based on a sound and expanding home industrial policy. I am pleased that the Chancellor of the Exchequer has had the courage and conviction to grasp the weed of procrastination which in the last 13 years has almost brought the country to ruin.
The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) is the only right hon. Member opposite who, since I have been a Member of Parliament, sought from the then Government benches to grasp the difficulties of the situation. He tried to introduce, piecemeal, measures to save the economy, but he could not convince his colleagues on the Government benches or the then Leader of his party that the lines which he was following were sound and reasonable. In the process he lost his head.
If the present Opposition had had the courage and resolution required of the situation they would have seen that in those days they had in the right hon. and learned Member for Wirral an instrument to put the country's economy on a sound basis. It was a great pity from the point of view not of the present Opposition but of the nation that the right hon. and learned Gentleman's courage and determination were sacrificed because the party opposite wanted to win the election.
What is the present Chancellor trying to do? The answer to this question bears repetition. He is endeavouring to rectify our balance of payments situation, in the first instance. We inherited a balance of

payments deficit of £745 million, and if capital and interest on the debt to America had been included it would have been over £800 million. Why should not the Chancellor or the Government of the day seek to rectify this wrong which we inherited from the outgoing Government? No one has said in our debates that we should not try to correct our balance of payments situation. Everyone has said that it is absolutely essential for the wellbeing of the country, but some hon. and right hon. Members opposite have never been prepared to support measures designed to that end.
My right hon. Friend has gone further. He has broadened and made more effective the Capital Gains Tax which the right hon. and learned Member for Wirral tried to introduce. Why not? Who disagrees with the principle? One or two hon. Members opposite may do so, but the Front Bench leaders of the Conservative Party are agreed that a Capital Gains Tax is essential for the well-being of the country. Why is my right hon. Friend to be drawn and quartered when he suggests that a Capital Gains Tax should be operated so that all who pay tax should bear an equal share under our tax system? Who is courageous enough to deny the principle of equal taxation? No one, I presume.
The Chancellor has also dealt with expense allowances so that they are made as reasonable and fair as possible. Who is so bold as to say that we should not control these expense allowances? I am in business myself and I have known the terrific amount of money that could be lavished, for instance, on a country businessman coming to London. It is fantastic. There is no justification for it, and there is no doubt that it had to be brought under control. Anyone who says otherwise must be a fool or a knave, and for all I care he can take his choice as to what he is.
Then there is this great and terrible thing called the Corporation Tax. The hon. Member for Heeley said quite categorically that the right hon. and learned Member for Wirral was anxious to introduce such a tax. On one occasion when I had an opportunity to intervene in a debate the right hon. and learned Member said that he had wanted to simplify the tax system. He had the right aims and objects, but what


we have done in a very short time is to alter our tax system, and there is no doubt that while it has been criticised in the business world, we all know that the end result will be of considerable benefit to industry as a whole.
Many industries will come to accept it and look upon it as a fair measure and a great blessing to business as a whole. It is unfair that some businesses should carry a bigger burden of tax than others. Who amongst us is prepared to uphold a system where that can happen? As it is related to business abroad as far as our overseas investments are concerned, I consider it fantastic and illogical that any hon. Member should be against the proposals of my right hon. Friend, who is endeavouring to put the home-based industries on a par with foreign investments. Anyone in the business world with investments in various firms knows that great benefit comes from business investment abroad, but anyone who wants to be equitable and fair as between one business and another would say that the Corporation Tax is a reasonable way to approach a very difficult and complicated problem.
I have mentioned the question of controlling the investment of British funds abroad, because it is a matter that must be controlled and looked at more carefully than it has been in the past. In Committee, I pointed out that there were several industries in my own constituency, among them the weaving industry that closed down and went to India, and the foundry industry that went to Australia and South Africa.
When the right hon. Gentleman the Member for Bexley was at the Board of Trade, I approached him about a small business in my constituency which made mountings for coffins—and remember, we all get one sooner or later. It was quite an important business, and I approached the then President of the Board of Trade, the right hon. Member for Bexley, to see if he could help the firm to open up its former markets in Australia and New Zealand. To his credit, he did his best, unfortunately without success, because our capital had started these businesses abroad. I am not saying that we should not do that, but it must be looked at with great care to ensure that we do not undermine our home economy for the sake of financial gains to some investors.
We are living in a changing age, and I have spoken about the new outlook that agriculture must have in our national economy. We must have a different approach to the problems of exports and imports, even from an industrial point of view. These matters must be looked at as a whole and correlated to a greater degree than ever before. The emphasis must be placed on different parts of our national economy from those of the last 100 years or so.
I welcome in the Bill the fact that we are suggesting great cuts in our expenditure on arms. Who can disagree with my right hon. Friend that we must contain this great expenditure and, if need be, reduce it? There are many reasons for so doing, not the least of which is that if our people wish to keep their standards of living as they are at the moment and improve them in the future, we must continue to control and contain this extremely heavy and, in my opinion, very foolish national expenditure. I welcomed very much that aspect of my right hon. Friend's Budget.
There are those who complain that we have not done enough since we came to office. Once the full realisation of the implications and the effects of this great Finance Bill is felt in the country, the story that will be unfolded will be very different. The Government have, in my opinion, grasped the nettle, or the weed, of procrastination by introducing such a Measure. We have not yet killed the weed; we have not yet made up for those wasted 13 years of no action, procrastination, waffle and waste of time. A glorious opportunity for our nation has been thrown away by the party opposite, which was in power for so long and did so little.
I will not pursue that matter too far. One cannot transgress for too long on the time of the House. However, I do not speak very often, and I think it my duty and my responsibility to draw to the attention of the House the shortcomings of those who were in power for so long.
It is a pity that the Opposition do not acknowledge that we have been experiencing a rapidly changing pattern in our way of life. They have never recognised the need for a change in our system of taxation, a need which is evident to every intelligent man and woman in the country. The Opposition seem to be


blind to the realities of the position, and it seems to me that their main purpose is to retard the advancement of the Government and to try to convince the electors that this illusory thing called political power should again be vested in their party. What a great calamity this would be for the nation and for the world as a whole.
I commend the last words of the right hon. Gentleman the Chancellor of the Exchequer when winding up his Budget speech. He said:
The Government's aim is not to divide our people, but to unite them in an endeavour greater than we have ever made in peace time to secure national solvency, to ensure economic progress and to secure the full fruits of the people's industry. Rarely have I been more conscious of the country's difficulties than I am today, and never have I been more confident of the outcome."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 296.]
I say to my right hon. Friend, that exceptional Chancellor of the Exchequer—to quote the words of the right hon. Member for Bexley—"Be strong. Give a little but take much, because the future is ours if we do the job in the way that we have promised to do it." It has been a great revelation to see a Bill such as this coming before the House, and to see the great principles contained in it standing the test of time. The small Amendments and adjustments which have been made are of little consequence, as they pass the principles by. I say good luck to the Chancellor. May he be long spared to introduce many Budgets in the future.

7.39 p.m.

Sir Douglas Glover: I am sure that we have all listened to and enjoyed the speech of the hon. Member for West Stirlingshire (Mr. W. Baxter). He does not speak very often in the House. I can say with friendliness to him that the first half of his speech had a greater ring of sincerity than the second half. No doubt he enjoyed giving the second half, and thought he was back on the hustings, letting his lungs get some fresh air for a change. As I say, we all enjoyed it, but I think the first part of his speech was the best.
The hon. Member for Colne Valley (Mr. Duffy) has been very generous this evening, and I would like to join him in his generosity, because all hon. Members who have taken part in debates on the

Finance Bill have become more closely knitted together. It has been something on the lines of the old Greek city wars, when men tried to kill their opponents all day in battle and then shed bitter tears over their corpses in the evening. There has been something of that attitude on both sides of the House. It has been a doughty tussle. There has been no quarter asked for or given, and hard blows have been struck. But that does not alter the fact that, even today, this is still a monster of a Finance Bill. It has been produced by "Callaghan out of misjudgment". Once the Chancellor saw what he had produced, he shuddered, took an intense dislike to it and has had nothing to do with it ever since. He handed it over to two foster mothers, the Chief Secretary and the Financial Secretary to the Treasury, who, day after day nurtured this monster, gradually bringing it to a state when they could present it to the public, mostly shuddering but loyal. They have done a magnificent job in carrying out the chores of trying to bring the monster to a state fit for the public to see.
They have been ably helped by my right hon. Friend, Dr. Heath, and his hon. Friends, who have, during the last 28 days, carried out about 340 operations on the body and have now made it, although still a monster, at least able to walk and to totter into the public view. This is what we have achieved after hours of work. Every time the hon. Member for Manchester, Cheetham (Mr. Harold Lever), one of those "levers" of power in the Labour Party, spoke, I thought that he would smother the child. He is like a parent who presents the child to the family and says every time, "What a bonny baby" then shudders and goes away. In every speech which he has given, he has done his best to strangle or smother it.
When the hon. Member for Colne Valley spoke, one could feel running through his remarks this uncertainty about so much in the Bill. We are dealing in this country with the immediate problem not of whether our tax structure should be altered over the years but of whether we will control inflation, whether we will immediately, in 12 months, get our economy on to a firmer basis. Very little in the Bill is designed to deal with these immediate, urgent pressing problems. It may be an argument to say


that a Capital Gains Tax or a Corporation Tax will be a good thing, but, whatever the virtues or vices of these, they will have little or no effect on any of the problems which we shall have to try to solve in the next 12 or 18 months.
My main indictment of the Chancellor is that he has been so involved in this long Bill. As the hon. Member for Colne Valley said, it is the longest Bill since the Finance Bill of Lloyd George in 1909. This Bill has taken only half as long as that Bill to get through the House, but perhaps they did not sit so many hours into the early morning. They took 46 sittings and we have taken only about 22. This Bill is more irrelevant than the one which Lloyd George presented 50 years ago. Its provisions will be absolutely damaging to the things which the Chancellor says he wants to bring about.
We have not dwelt nearly enough on expenses. I know that the question of expenses has a political connotation. It brings to mind people with yachts—nobody ever mentions who has the yachts—and people with grouse moors—but no one ever says who has the grouse moors. Nobody ever invites me to them and nobody even invites me to go out in a rowing boat, let alone a yacht.
These things are said, but an enormous amount of the effect of the removal of entertainment expenses will hit—I say it again—the small man. It will hit the commercial traveller. It will hit people who are working on commission and it will hit them hard. It is no use the Financial Secretary smiling, I will not say in a cynical way, because this has already been said, but in a disbelieving way. It is true that it will hit literally hundreds of people very hard. They are not the people drawing vast sums of money and paying Surtax. They are people who, even if they added two or three hundred pounds to their gross earnings, would find that it made a great difference to their standard of living.
There are two schools of thought in the House about Capital Gains Tax. There is little knowledge of the effect of Capital Gains Tax on the levels about which we are talking. It is never a good thing to eat the seed corn, and that is what we will do if we start spending capital as income. It will be many years before one sees whether this tax

has damaged the economy. It will be fewer years before the public begin to realise that it certainly is not helping it.
I turn now to Corporation Tax. I have spent all my life in a family business. We have never had any money from outside. If the business has grown, it has grown only because of retentions, as no money has come from anywhere else. We have never gone to the market. Therefore, being that sort of person, I am basically a retentionist. But that does not alter the fact that, once a business gets beyond a certain size, once it wants to grow rapidly and needs to attract outside capital, it cannot do so unless it is paying out a considerable proportion of its profits and, therefore, producing a share which the public will be interested to buy.
On the other side of the argument about Corporation Tax, I am still convinced that the Government would have been wise to have accepted the Amendment on Report which would have put the operation of the tax back for another year. This was not conceived with any ideological hostility to the actual Corporation Tax, but it must be obvious to anybody who has listened throughout these debates that there is a good deal of unease, even on the Government benches, about whether this tax is right as it is framed at present, whether the anomalies in it—the overseas provisions and the other pressures in this respect—have been sorted out, and whether, therefore, it will work to the benefit of the economy or will turn out to be a drag on our export performance.
This is what I am worried about. People talk about overseas companies. There are enormous numbers of overseas companies today which are not open because of any wish on the part of the men concerned to open them, but because, if they do not open the overseas company, they will lose most of the trade which they already have there. This is true in the Australian market, for example. Anyone doing anything in the export of motor cars to Australia would not export a single piece of equipment unless he had an assembly line in Australia. Overseas companies have to establish subsidiaries elsewhere even to maintain, let alone increase, their present level of exports. Therefore, this making it less worth while for a company in this country to


establish a subsidiary overseas is not encouraging our exports but is taking steps which will literally discourage increases which everybody, on whichever side of the House he sits, wants to see come about very rapidly.
We on this side of the House have carried out a constructive and informed opposition and—if I may say this to my colleagues—the best which I have heard from the Opposition in the years which I have been in the House. I do not mean that as a reflection on the party opposite. I think, as the hon. Member for Come Valley said, that that it has been a remarkable performance. I have not heard a series of debates on a Bill in which there have been so few bad speeches. From wherever they have come in the House, the speeches have been good and constructive, thoughtful and on the ball towards the problems which we are trying to overcome. I believe that those who watched the House in operation during the debates on the Finance Bill have found that it has increased in stature. Both sides have performed remarkably. I am proud to have played some part in the debates.

7.50 p.m.

Mr. Joel Barnett: I think that it can fairly be said that we have examined the Bill in very great detail since it was introduced. We have all had time for second thoughts, and perhaps third and fourth thoughts. I do not think that anybody can deny—I shoud be the last to do so—that the Bill has been very much improved during its passage through its Committee and Report stages. I pay tribute to right hon. and hon. Gentlemen opposite for the constructiveness of many of their speeches. But I do not think that they should be churlish when their constructive points are met—points many of which I myself have also made.
I should have thought that one of the main purposes of our debates during the long days and nights of the Committee and Report stages was to make the Bill a better one. If the Opposition have achieved that, they should be delighted. After allowing for their natural and understandable desire to make party points, I hope that they will concede equally that we have had a first-class

Treasury team. Indeed, I should have thought that, rather than criticise the belated recognition of first-class Amendments, the Opposition should congratulate themselves on having presented their case so admirably. They do themselves an injustice, they belittle themselves and the value of their argument when they say that the Government have at last accepted what they have been saying for so long. They should be delighted, and I hope they are. They have shown intelligence and zeal and hard work.
As the hon. Member for Ormskirk (Sir D. Glover) said, the Opposition have done better than any Opposition that he has seen for a long time. I hope that they will continue to do that for very much longer. They have presented their case quite well—

Sir D. Glover: The hon. Gentleman has just said that we ought to be generous.

Mr. Barnett: The Opposition are obviously enjoying it. If they enjoy being in opposition, I think that it is generous to say that we should like to see them continue in their enjoyment. They have presented the case well, and on many occasions converted the Treasury team to their point of view.

Mr. Sydney Silverman: I am very interested in what my hon. Friend is saying, but does he not realise that the Opposition have done their job so well that now, at the end of the day, they propose to vote against the results?

Mr. Barnett: We shall see what they do in due course.
I want to deal with one aspect, the Corporation Tax, and, in particular, with close companies, which, as I have previously said, have such an enormous growth potential for our economy. Much has been said about the confusion and concern felt by many businessmen and also by accountants, my professional colleagues. It is true that there is a great deal of confusion and concern. I am sorry to say that speeches like some of those we have heard today have helped, rather than otherwise, to build up this confusion. I hope to prove my point in a few moments.
The right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd), who is


not now in his place, made the sort of speech which does the greatest possible amount of harm by repeating the ill-informed criticism which helps to cause further confusion and anxiety in the minds of businessmen. I thought that one of the most constructive speeches that I heard from the Opposition was that by the hon. Member for Sheffield, Heeley (Sir P. Roberts). He said a great deal which was very sensible. I believe that he is an industrialist; perhaps that is why. One appreciates that there is a difference between industrialists who deal with problems on a day-to-day basis and politicians and others who do not have to deal with the practical problems.
I deal with this aspect because I feel very strongly that the case that can be made against the Bill has been very greatly exaggerated. Incidentally, I do not dispute that when the Bill was introduced it had bad parts. In particular, as I have said on a number of occasions, the original Clauses affecting close companies were not good at all, and some of the Clauses are still not as I should have liked them. I am still not happy about the one concerned with the remuneration of directors; but that is a niggling point. The remaining points about which I am not happy can be dealt with in the future. As the Chief Secretary said, when we fix a certain figure for the remuneration of directors, that is not rigid and can be reviewed regularly.
There are, of coure, still certain anomalies and they have been quoted extensively by the Opposition. However, I do not think that it can be stated often and strongly enough that the vast majority of companies will positively gain. For the vast majority of close companies, certainly very large numbers of them, there will be no effect because the amount of their profits will be such that they will be able to allocate it as directors' remuneration and will not, therefore, be affected by the Corporation Tax. Others will gain very considerably as the result of Corporation Tax by the reduction from the Income Tax and Profits Tax rate of 56¼ per cent. to a maximum of 40 per cent. As has been said, 35 per cent. will bring the same amount of revenue.
It should be repeated time and time again that the Opposition do not help the economy or the business community by pretending otherwise. The facts are

irrefutable. The vast majority of close companies, in particular, will benefit considerably by the Corporation Tax provisions. I hope that we can stop the spreading of gloom and despondency once and for all. I want to relate a recent experience of mine which I think puts this in its proper perspective.
A Tory businessman friend of mine, who is chairman and managing director of a close company, complained bitterly to me about the Finance Bill when I walked round to his house the other day. He had very bitter complaints to make about it. To change the subject I asked his wife about their holidays. She replied, "I am fed up with holidays. We are just back from the Bahamas. We have been on cruises. I am going to stay at home for the rest of the summer and sit by the swimming pool." This rather vivid contrast sums up the real effect of Corporation Tax and the impression given of its effect.
It is said that businessmen do not understand the Corporation Tax. I think it is fair to compare the new system with the old system. I should like to ask how many directors on the benches opposite could put their hands on their hearts and tell me that they understand, or have understood, the Income Tax and Profits Tax system. I need give only a small example. Let us take the example of a company with its financial year ending on 30th June, 1964. That company paid Income Tax for 1965–66 on those profits, and it paid that tax on 1st January, 1966, on the profits of the accounts for the year ended 30th June, 1964 profits less investment, initial and annual allowances. On those same accounts it paid Profits Tax on an actual basis, and paid it in 1964. Those profits were on the same accounts, but less investment allowances for those accounts, and so far as initial and annual allowances are concerned, as to three-quarters of the assessments for 1963–64 and one quarter on the assessments for 1964–65.
I am sure that up to that stage it is very clear to right hon. and hon. Gentlemen opposite, but if that has not confused them sufficiently, one has only to consider the other complications that could equally arise in the case of the opening and closing provisions, for example, for the business year ended 30th June, 1964.


Supposing the business had a chain of shops and took an additional shop in March, 1964. That company would have the profits for the small period in which it owned the shop assessed for 1963–64, 1964–65 and 1965–66—all out of the same profits of the year ended 30th June. 1964.
If hon. Members opposite claim that businessmen and company directors really understood that system then they are entitled to say that the Corporation Tax will not be understood or is perhaps even more complicated. But, by comparison, the Corporation Tax, if not simplicity itself, is child's play. It should be clear to businessmen inside and outside the House that, under the Corporation Tax, all they need do is to ask their accountants for the adjusted profit and the capital allowance in that one year and then they can, by their own simple "do it yourself" kit, calculate the tax very quickly. So, when hon. Members opposite say that the Corporation Tax is more complicated and involved than the old system, I believe that they do not appreciate the problem at all.
Then it is said that my professional colleagues are also very confused and concerned. Again, this is a case of repeating something often enough until it is taken as fact. I do not dispute that there are certain difficulties in the transitional period but hon. Members opposite must not exaggerate. The majority of small and medium sized accountancy practices will have already found that the complications are simply non-existent in the majority of cases.
From my own experience in my practice, my staff have already completed quite a number of accounts with years ending between 6th April and 30th June. The bulk of the work is in the preparation of the accounts. That has not changed. The preparation of the Income Tax computation is precisely the same, with the exception of one item which has to be added back in the computation—entertainment expenses. This has had to be dealt with before in any case for the purpose of deciding whether anything or how much ought to be allocated to a particular director as private benefit. The computation of capital allowance, investment allowance, initial allowance and annual allowance is precisely the same. The checking of distribution is no more complicated than under Section 245 of

the Income Tax Act, 1952. Indeed, I believe that it will be much simpler.
The only other task is the calculation of the tax reserve, and this is simpler to calculate when one is dealing with one item rather than with both Income Tax and Profits Tax. So I hope that I have shown that there are great benefits to the vast majority of people affected or to those who are having to deal with this matter.
We should not overdo the niggling criticisms, as I have said I agree that there have been anomalies and that some still exist. No doubt in future Finance Bills we shall have to deal with further anomalies that will undoubtedly occur to us. But in any broad-based tax system there are bound to be anomalies and our function will be to do something about them.
We should recognise that one vital thing, above all else, that the Bill does is to deal with the plough-back that is available to close companies, in particular, and the advantage they gain from so doing. Of course there is an argument as to whether it is better to encourage retention or distribution. Some excellent points were made by the hon. Member for Heeley as to why an industrialist would want to encourage retention for plough back. He made some new points which we have not heard in our previous discussions.
I have said previously that it may well be that we shall find in practice, particularly in the case of the larger public companies, that in due course it would be better to distribute but at present, on the balance of argument presented, the advantages of the encouragement of plough back are far in excess of any case that could be made for distribution to enable more to go back in equity to individual companies. This was answered in many debates, particularly by the Chief Secretary, when he referred to the situation that existed when we reduced the very large amount of Profits Tax that used to be paid on distribution.
I hope that we can retain flexibility of mind to enable us to say that, in future, if it is proved—and it is not proved at the moment—that distribution will help them we will encourage it. But on the present balance of argument the retention argument has been proved, at least to my satisfaction.
Close companies are definitely encouraged by a considerable reduction in the total taxation with plough-back. The vast majority of companies will gain considerably. That is the great power for good in this Bill. It is power to the good of the nation, to those companies which will be so encouraged to plough back their profits, in the long run to the good of the shareholders and to the good of the nation's economy.

8.8 p.m.

Mr. Stratton Mills: The hon. Member for Heywood and Royton (Mr. Barnett) has spoken frequently in our proceedings, making valuable contributions. From time to time he has given encouragement to the Treasury Bench. Certainly the words which have just flowed from him brought a gleam of light to the silent man on the Treasury Bench. He referred to the effect of the Bill as amended on close companies. He made the point that it took tremendous pressure from the Opposition to shift the Government from the position they had taken up, which would have been most harmful to close companies, and to bring them to some form of reality. But it would be churlish if I did not say that the Government went a long way to try to meet us on close companies and we appreciate their assistance and the time they have taken to look into the points which many of my right hon. and hon. Friends put.
I want to make some reflections which I jotted down on a postcard throughout the long stages of the battle on the Bill. Certainly it bears little relation to the Bill first presented—223 pages have been expanded into 246 and the number of Clauses amended substantially is on record. How was it that the Government got themselves into this mess, because mess it is? The Chancellor is one of the most amiable of individuals in the House as far as it is possible for a Chancellor to be amiable, but the difficulty was that he was too gullible. He believed everything that he was told. The Inland Revenue and Dr. Kaldor put great heaps of documents on his desk for him to sign.
We finally reached the stage in which, when one of my hon. Friends moved an Amendment to delete some words, the Chief Secretary had to say that there

had been two alternative drafts in the Bill and that they had forgotten to take one of them out. That is the kind of thing that has got the Chancellor into difficulty. He has been too open—too ready to accept the brief that has been put in front of him. If we had had a tougher Chancellor—if the First Secretary had been Chancellor—he would have known what was politically acceptable to the House of Commons and which part of his Inland Revenue brief was to be swept aside as totally unacceptable. If only the First Secretary had been busily engaged in this task he would have been much more usefully employed.
The Amendments which the Government have accepted have dealt with a number of anomalies which have been exposed, but the situation is just like a leaking ship; once one set of anomalies is dealt with more are produced as a direct result. There are two obvious examples. Why, if a farmer is to get any benefit of the Capital Gains Tax concession, is it necessary for him to wait until he is 60–65 to pass on his business to a member of his family? A person who becomes ill earlier on in his life does not receive this concession. Further, if a farmer married at the age of 18, when he was 50 he could well have a son aged 31. What would be more reasonable than for him to wish to pass on his farm to his son? He cannot do that and obtain any advantage from the concession, because the Chancellor has arbitrarily decided that no benefit can be gained until after the age of 60.
Another example concerns close companies. If a shareholder puts up some loan capital in a company and goes on to the board himself the interest on that loan capital is not allowable as an expense before Corporation Tax, but if he puts his accountant on the board the full amount is allowable. This is the kind of anomaly that has been gradually exposed by various Amendments all the way through the Bill. The effect of the Bill will be with us for 20 years. For 20 years, when new Finance Bills are introduced, Treasury Ministers will say, "This Amendment deals with a loophole or an omission from a Clause in the Finance Act, 1965". This will become the Parliamentary draftsman's Bible for the drafting of future Finance Bills.
But the real tragedy is the total irrelevancy of the Bill. My right hon. Friend the Member for Bexley (Mr. Heath) has demonstrated this very well. I suspect that there is a typed notice in the Treasury saying, "All arguments about requiring a Capital Gains Tax or a Corporation Tax for reasons of social justice must not be referred to when the First Secretary is in the House". The real effect of the Bill has been to divert the activity of the Chancellor from the real issues concerning sterling, our balance of payments, and inflation. It is possible to argue that the Bill has been very harmful to the nation's interests on those three points. People overseas look at the Chancellor of the Exchequer and say, "Why should we put our money into Britain if we cannot trust the banker?" That has been one damaging effect of the Bill.
I now want to say a few words about the Government supporters of the Bill. It has become obvious that only about 20 Members opposite can read a balance sheet or understand the simplest basic points about taxation. This contrasts very strangely with the 300 or more Members opposite who offer their services to the nation as economic planners! It would be more helpful if the ratio were the other way round, because hon. Members opposite have demonstrated that they have plenty of bias but very little understanding of the problems of industry or taxation.
At the beginning of the debate there was much comment about the empty benches opposite. Then the Patronage Secretary was driven to great industry, and he arranged a shift system which provided for about 30 Members being recruited or conscripted to sit on the Government benches for an hour each.

Mr. Duffy: Many of us have tried to be generous in the closing stages of the Bill. Will the hon. Member accept my assurance that there is no truth in his suggestion? Some of us have been taunted because we have not spoken more often. That did not mean that we did not appreciate what was said by hon. Members opposite.

Mr. Stratton Mills: One of my hon. Friends said that the crowd scenes in a Cecil B. de Mille epic have never been

better organised than were hon. Members opposite by the Patronage Secretary.

Mr. Robert Cooke: I hope my hon. Friend will remember one occasion when, at five o'clock in the morning, 60 baying Socialists were driven from the Tea Room into the Chamber to interrupt my speech.

Mr. Deputy-Speaker (Sir Samuel Storey): Order. We cannot pursue this. In a Third Reading debate we must discuss what is in the Bill.

Mr. Stratton Mills: Hon. Members opposite must realise that in reality our taxation system, both in respect of individuals and companies, works on a basis of taxation by consent. The best Finance Act ever drafted will not deal adequately with the person who deliberately sets out to cheat, or delay or obstruct. The Chancellor of the Exchequer would agree that the great bulk of people and of companies—98 per cent. or even 99 per cent.—co-operate. They find out from their accountants or solicitors what their obligations are, and endeavour to follow them out as best they can.
I wonder whether the Bill has not harmed this climate, in pushing just a little too far the harsh powers of taxation. Many people will feel that there is a danger of the system breaking down because of the unfairness created by the Bill. I hope that hon. Members opposite will appreciate that there is much less tax dodging and tax fiddling in this country than many of them allege. Certainly some of them have greatly overstated the position.
How will matters develop as a result of the Finance Bill? The Labour Party has de facto abandoned the policy of nationalisation. It is said that in the dictionaries in Transport House a page has been torn out, and that the word "nationalisation" cannot be found. The Labour Party has very grudgingly accepted the concept of private enterprise. The real question is: how shall we create in this country, as has been created in the United States of America, a vigorous, free enterprise economy which is competitive, responsible, encourages savings, is efficient, and which welcomes


good profits, well earned? It is absolutely vital to have this concept of industrial society as in the United States of America accepted and encouraged by both political parties in Britain.
If the whole basis of our economy is to be kicked around between the parties, as a form of political football, then it is the economy that suffers most. I hope that hon. Members will accept that I am not saying this facetiously, but one of the great tragedies it seems to me is that there are so few hon. Gentlemen opposite who have industrial experience, experience in the boardroom or of the higher level of management. I think it would be of great value if, when they go into Opposition, the opportunity is seized by the business community to offer hon. Members on the other side of the House the chance to play their rôles in the boardrooms of the country.

Mr. Harold Lever: Why wait until we are in Opposition? Why not seize the opportunity by the forelock when we are still the Government?

Mr. Stratton Mills: I was going to say that I was thinking specifically of the Treasury Bench. Back benchers have their own methods of self-advertisement.
I feel that there is a great need for a campaign by private enterprise to bring home to people the benefits which the country gets from a vigorous system of buoyant profits. Not only does the Chancellor of the Exchequer benefit, but the 4 million shareholders, the unit trust holders and the trade union pensions funds benefit. The only pension fund in the country which has no equities is that of Transport House. I am not quite right in saying it has no stake in equities, it has shares in one highly competitive growth company which looks towards automation and the twentieth century with a most realistic approach. My hon. Friends on these benches, with experience in the City, will, of course, immediately recognise the Buenos Aires Tramway Company, Ltd.

Mr. William Hamling: Would the hon. Gentleman care to tell the House where the Conservative Central Office has its funds invested?

Mr. Stratton Mills: I am quite certain that if I did I would be immediately ruled out of order. What I am arguing

is that not sufficient people in this country recognise that either directly or indirectly, they benefit personally from buoyant profits in industry.
I think we may have to go even further than this. There are almost 4 million shareholders who have direct holdings in shares. There are their families whom they support so one must add to this number of 4 million. I think that there is a great need to form some sort of shareholders protection society to prevent political demagogues severely damaging their interests through lack of knowledge. [Hon. MEMBERS: "Hear, hear."] I am encouraged by the baying from the benches opposite to say that if this was done on an all-party basis it would be more effective. If I can get people to come together in the society we will invite the Chancellor of the Exchequer to become our first president, and the Chief Secretary to become a vice-president, or some suitable office.

Mr. Callaghan: I am very much obliged to the hon. Gentleman for this very remarkable offer. If we are going to improve the education of hon. Members, which is apparently rather one-sided, does he think it would do the Opposition Front Bench good to get some experience in the coal mines, on the engineering bench, or running a railway?

Mr. Stratton Mills: I think there is a lot in what the right hon. Gentleman says. It seems quite wrong that the great trade unions of this country should pay retainers only to back-benchers opposite. In addition, more Members of this House should be able to talk effectively in debate in that field. I am glad that the right hon. Gentleman has made the point. I think it is worth contributing to the debate.
I want to deal with one of the great fallacies that has been running throughout this debate and which has come from the benches opposite. They claim that capital has a privileged position in Britain. We have heard this a lot from the benches opposite. I think that it is a basic over-simplification of the issue. I am excluding from my argument the professional financier, because many different arguments apply to him.
The case has been very well put in the Financial Times of 22nd June in an article written by Harold Wincott called


"The Red Queen and the Pink Chancellor". I cannot be sure who the Red Queen is; the Pink Chancellor I think I can identify! Harold Wincott gives an interesting graph showing the Financial Times share index, which commenced in 1935 at 100 and, adjusting for the fall in the purchasing power of the £ over that period, he says that the index is still only at 100 some 30 years later. This is despite the fact that the actual Financial Times index has gone up to about 315. This, I think, demonstrates the point that the fall in purchasing power of the £ has shown a lot of paper profits on the Stock Exchange, as far as the average investor is concerned, but in real terms of purchasing power he is back where he started in 1935. The American index on the same base has gone from 100 to 300 over that period. Referring to the United States, Wincott says:
… the gross national product has quadrupled in real terms over the period we have been examining, whereas ours, also in real terms, has only doubled.
I think that this makes the point as to the effects which can accrue to a community from buoyant profits very well.
I want to examine a case which I think is not untypical to demonstrate that the individual in business who is dependent on capital is very often, through our present taxation system, at a disadvantage. I have worked out this example myself and there is always the possibility of some inaccuracy. The example I have is that of two married sisters. One of the husbands works in his own business which he had built up and the other in a big commercial company. Both sisters are widowed in middle age and left with two children under the age of 11 to support.
The husband who worked in the big company had very little capital, but there are generous pension facilities for his widow and family. I have estimated that his widow has, say, £2,000 gross and that tax of £381 is deducted because it is earned income. The wife of the husband who built up the business sells it on her husband's death for, say, £75,000, because she cannot continue to run it. Estate Duty at about 45 per cent. reduces it by £35,000, leaving a balance of about £40,000 for the widow and children, which, invested at 5 per cent., gives £2,000 gross. But the tax which that widow pays on the same amount of

income is £564 because it is classified as unearned income, having come from investments. Under the present provisions, there will be a claim for Capital Gains Tax which will diminish the capital sum further.
I hope that this example will illustrate the difficulties under the present system of taxation of people who are in business and who are relying on their own capital assets which will increase under the Bill.
If one asked a year ago which country was the most heavily taxed in the free world, the answers were arguable. There is no doubt now that Britain is the most heavily taxed country in the Western world as a result of this Bill. [HON. MEMBERS: "Rubbish."] The Chancellor says "Rubbish". He is true to form.

Mr. Diamond: I did not want the hon. Gentleman to mishear. The Chief Secretary said "Nonsense".

Mr. Stratton Mills: The difference between the Chief Secretary, who says "Nonsense", and the Chancellor, who says "Rubbish", is one of approach. But we have a top rate of 18s. 3d. in the £ for Surtax, a top rate of 80 per cent. for Estate Duty and a Capital Gains Tax of 30 per cent., even if the assets have been held for a lifetime and the Chancellor is taking only paper profits, created by Government inspired inflation. This is a very heavy taxation burden by any standard.
The people who will be hit by the Bill are not the professional financiers, nor, necessarily, the people in the millionaires' league. It is foolish for the Treasury to imagine that this is so. They will have open to them the best advice of accountants and lawyers in the Western Hemisphere. If they are pushed too hard they can change their domicile. They have all the options open to them. The people who will be hit by the Bill are the medium range savers, farmers and businessmen who will bear a very heavy taxation burden.
This is a bad Bill. The Opposition, by their Amendments, have made it a little better. But it is still basically a very bad Bill, and I shall gladly vote against it.

8.32 p.m.

Mr. Robert Sheldon: We have had, in the main, one


of the best debates of the Bill's passage and it is very interesting that, despite the comments of the hon. Member for Belfast, North (Mr. Stratton Mills), he drew attention to a number of the good points in the Bill which were so very well mentioned by the hon. Member for Sheffield, Heeley (Sir P. Roberts). It is good that at this late stage we should have this sane and balanced view of the main purpose and intent of the Bill and, consequently, its dissemination to the industrial and business world.
It would be remiss of me if I were not to congratulate the occupants of the Treasury Bench on what I consider to be a magnificent job and a great piece of legislation which they have so ably conducted through the House and will finally see on the Statute Book. It must be a great source of pride to be one of the great reformers of our time.
As the Chief Secretary said, the main intent of bringing in the Capital Gains Tax and Corporation Tax at the same time concerned their interlocking nature. Many people felt that this legislation was so massive that it should be split up and introduced in succeeding Sessions or even at greater intervals. The more one examines the Bill's consequences, the more one understands why the Capital Gains Tax provisions so splendidly offset some of the purposes of the Corporation Tax.
The three main principles of the Bill are these. First, the basis of taxation should be an increase in wealth. It does not matter how the wealth is increased. It is sufficient that it is increased. Whether this wealth is increased by income, by shares appreciating, by assets increasing in value or by dividends, all these increases are subject to taxation. The principle here is that the basis of taxation should be the increase in wealth. This is the justification for the Capital Gains Tax.
The second main principle is that the taxation of companies need not be at the same rate of tax as that applied to individuals. Opportunities are being given to succeeding Chancellors, who will welcome this tax because of the flexibility that it allows him and his successors over the years ahead, to change the rates of taxation without impinging necessarily on the rate of Income Tax. The two dif-

ferent kinds of taxation are now known to be quite different.
Although the right hon. Member for Altrincham and Sale (Mr. Barber) suggested that Profits Tax could produce the same solution, this sort of juggling is a very poor substitute for the sort of mechanism that has now been devised. A variable Profits Tax for distributed and undistributed profits is a poor alternative to the method that we now have and will be able to use so effectively.
The third main principle that I see in the Bill is the need to encourage growth. My right hon. Friend the Chief Secretary in succeeding debates has simplified the argument so that everybody really understands this point adequately at last. The need to encourage growth has been argued well in this House, but often we forget the need of the many driving and thrusting firms. It is all very well to say that they can go to the capital market. It is the firms which are in their initial stage which have the greatest difficulty in obtaining capital.
I know, and I know of friends who have been in the same situation, that when one is at a certain stage in the break-through in one's industry, one's knowledge of finance might not be quite as great as one's knowledge of what one does for a living. It is at that time, when the big break-through should be coming that the needs for finance are greatest. Here we are providing the greatest, broadest possible incentive for further growth and expansion which will be of immense benefit to this kind of firm.
As both my right hon. Friend the Chief Secretary and my hon. Friend the Member for Heywood and Royton (Mr. Barnett) have shown, the driving, thrusting, growing companies will now easily be able to calculate their liability to Corporation Tax. Many directors of firms who are not particularly knowledgeable in matters of finance will also be able to calculate how much they will be able to have for retention, how much they will be able to plough back and, without going to their accountant again and again, they will be able to project in the years ahead the kind of growth that they will have.
In the past, however, one of the difficulties of encouraging retention and consequent growth has been that a capital


gain has been created. The greater the growth encouraged by the Chancellor, the greater the possibility of avoidance. Now, because of the provisions of the Capital Gains Tax, the encouragement to growth is quite unlimited and the Chancellor can offer the opportunities to go full speed ahead to invest every penny, if a company so desires, in the knowledge that it will not be inhibited by any legislation that would otherwise have to be introduced to promote a certain degree of fairness.
The one aspect that has not pleased me a great deal, although I understand the difficulties, has been the effective reduction in the investment allowances. We know that, as my hon. Friend the Member for Birkenhead (Mr. Dell) said, one of the country's great needs is for an increase in our capacity.
We know that long before we get to the main stages of a boom our capacity is fully utilised in so many of our exporting industries, and one of the arguments that should be noised abroad is that there is no possibility whatever of this country devaluing. No Chancellor would be so foolish as to do that, because we do not have the extra capacity to make use of such devaluation. If we devalued there would not be the increase in capacity which would permit of effective devaluation, and this is why the argument for devaluation was so easily set aside last November.
We must make sure that we increase capacity. Total Government assistance for investment in industry is not as high as it should be. At the moment, £322 million is provided by way of investment allowances. The initial allowances conceal a certain effective subsidy, in that in real terms they are essentially loans which are repaid when the investment is sold. A certain proportion of the initial allowances are repaid when the investment is sold, and that subsidy, as an interest on the loan, probably works out at about £30 million. That is an approximate figure worked out on the basis of the interest on the loan effectively created by the initial allowances.
The annual allowances also conceal some broad subsidy. They are really depreciation allowances. They allow for a more rapid depreciation than is

generally common in industry, so here again we get the effect of a concealed loan, and the interest on that loan is of some account.
The total incentive for investment is therefore about £370 million. On 10th May, 1965, my hon. and learned Friend the Financial Secretary said:
The Corporation Tax will serve a useful purpose, if only because it will put a brake on the growth of this relief"—
he was referring to the allowances for investment—
while a review is undertaken to see whether this is the most profitable way in which to secure the increased efficiency of British industry, which is our common aim. I suggest that the House should await the outcome of that review."—[OFFICIAL REPORT, 10th May, 1965; Vol. 712, c. 55–6.]
We know that the Corporation Tax has effectively cut the value of all these capital allowances from the figure that I have quoted of about £370 million annually to about £240 million, an effective cut of about £130 million. This might seem a very savage cut in what is obviously an important section of our economy, but we know that the Corporation Tax itself gives an encouragement to higher retentions and subsequent investment, and this may effectively offset, or more than offset, the cut.
My calculations show that if there is an extra retention of 9 per cent. as a result of the Corporation Tax, and this is subsequently invested, the investment provided by that 9 per cent. will be equal to the full incentives we had under the old system of allowances. This minimum of 9 per cent. is extremely probable, and will almost surely be exceeded. If that is the case, Corporation Tax will not hit investment, but will promote it.
Even so, the promotion itself is inadequate and is still not discriminatory, and this question of discrimination is of some importance. It should be remembered that at the moment we have some feeble forms of categorisation. For example, we have annual allowances on combine drills which are scheduled at 31¼ per cent. and annual allowances on precision machine tools which are scheduled at only 20 per cent. I mention this obvious anomaly not as an argument against categorisation, but to show the need for better categorisation than we have had before.
There is one other aspect of Corporation Tax about which I am not very happy. This does not concern, as so many complaints about Corporation Tax do, the need for further concessions. There is a concession which might have been withheld with profit to all. That is in the definition of a close company which was changed, the definition of the close company which is also a public company and the concession which allows firms with 35 per cent. of their shares owned by the public to be exempted from the provisions relating to close companies.
I ask the House to consider the situation of a public company controlled by one person who owns 64 per cent. of the share capital. He would not be in control of a close company. In the case of a private company five people owning 11 per cent. would be classified as a close company. I accept that the provisions concerning the close company are not as disadvantageous as many hon. Members opposite have led the House to believe, but one difference between them is of importance. If a company invests or distributes, the position is the same both for close companies and for open companies, but if a company wishes to retain—that is, to stay fat—the position is different.
A close company must be either expansionist or must distribute, but an open company has the third choice of retention. The general public company, before the introduction of Corporation Tax, if it retained laid itself open to the take-over bidder. The hon. Member for Heeley, mentioned this' incentive to be efficient. As hon. Members know, one of the reasons why percentage dividends have increased year by year over the last 15 years has been the threat of takeovers. That threat has acted as a spur to companies owned by the public to distribute, or to invest profitably. For such companies Corporation Tax will not discourage retentions. It will not discourage retentions because the discouragement is already there.
What Corporation Tax will do will be to alter the balance between distribution and investment in favour of investment. The close company, by prohibiting retention, will be presented with the choice of distribution or investment. We will now promote a third type of company, an open company controlled by an in-

dividual with the choice of investment, distribution or retention. We have therefore introduced a new type of company which can survive because it is fat. It is a pity that the essential completeness of the Bill should have been breached in this way.
I have been engaged on this Bill over a number of months and, like many others, in a way I have come to love it. I have learned a great deal. I have been very privileged to be present at a time when the financial and economic structure—because the tax structure will largely control this—is being changed so much. In time the criticisms and slighting comments will be forgotten, but the benefits will remain for many years to come.

8.50 p.m.

Mr. Peter Bessell: I should like to add my congratulations to those which have already been offered to the occupants of the Treasury Bench for the way in which they have worked so hard and continuously throughout the various stages of the Bill. I was very relieved earlier this evening to see the Chief Secretary yawn, because I had almost reached the conclusion that it was impossible to tire him in any circumstances whatsoever. I am glad to know that he is subject to the same human weaknesses of many others of us.
Whatever the merits or faults of the Bill, it certainly cannot be said that it lacks imagination. It has imagination, ingenuity and, above all, ambition. The Chancellor, in his Budget speech, made it quite clear that Her Majesty's Government would promote major tax changes, and this pledge has certainly been honoured in the Bill. It is a matter of real regret to me and to my hon. Friends on this bench that the imagination, ingenuity, ambition and the fulfilment of a pledge should not be the strength of the Bill, but in many ways its worst weaknesses.
With respect to the Chancellor, if I may say so, he has attempted too much too soon. I believe that the hon. Member for Scarborough and Whitby (Sir A. Spearman) was quite right when he said that the Chancellor's Budget speech was well received generally throughout the country and that many of the proposals in his speech gave considerable hope to many people. It is unfortunate that the


Bill does not fulfill so many of those high hopes.
The problems which we are confronting as a nation are clear not only to us, but to every one of our friends as well as our enemies abroad. The first problem is that of correcting the balance of payments situation, which is perhaps the most dangerous single issue which has faced this country at any time since 1947. The second problem is to stabilise our reserves of gold and dollars which have run to a perilously low level. The third problem is to overcome the ever-rising costs at home and the failure materially to increase production in relation to other Western countries, which is an anxiety felt by Members on both sides of the House. At all costs I believe that this year's Finance Bill should have been streamlined to meet these problems and demands upon us as a nation. All other considerations should have been set aside, at least for the time being.
Turning to the Bill itself, for many years we on the Liberal bench have advocated a Capital Gains Tax. We believe that he who works hardest should not be the person who pays the most taxes, while he who has the most cunning and wit pays the least taxes. To that extent we have always maintained that the Capital Gains Tax should be an essential part of our taxation structure. I believe that it is fair to say, too, that in latter years the Conservative Party has recognised this need and certainly went some way to introducing a Capital Gains Tax a few years ago.
But, with great respect to the members of the Treasury Bench, the Conservative Party was wiser, in suggesting its own introduction of a Capital Gains Tax gradually, than Her Majesty's Government have been in making such a drastic and far-reaching introduction in the present Bill. Instead of providing the stimulus for production and for expansion which our economy needs so badly at the moment, the Capital Gains Tax in its present form forces into the gullet of industry a measure which it cannot digest and which may to some extent stifle the growth of free enterprise.
There have been many and continuous comparisons with the Capital Gains Tax as it operates in the United States. I am very familiar with that tax, because

I have business interests there. The tax as it appears in the Bill is very different in its operation from that which is known throughout the United States. Perhaps the most important point of all to make is that if the rate of Capital Gains Tax in this country is to be 30 per cent. it is well worth remembering that, in practice, on average in the United States it is only between 9 per cent. and 9½ per cent.

Mr. Barnett: Is not the hon. Gentleman aware that for far and away the majority of people the actual rate here will not be much higher than 20 per cent.?

Mr. Bessell: I appreciate that there will be considerable variation and changes at various levels, depending upon the individuals and businesses concerned, but as an average the tax will be nothing like as low as 9 per cent. or 9½ per cent. which we know is the operative rate in the United States. That at least is my calculation, but no one would be happier than me if I should be proved wrong.
Many of the exemptions introduced by the Chancellor at a late stage in our proceedings have been welcomed throughout the country and it would be churlish of me if I did not express gratitude to him for his second thoughts in matters which are dealt with in Clauses 26 to 36. Whilst paying tribute to the right hon. Gentleman's willingness to introduce Amendments in this and other connections I must add that the very fact that so many Amendments were introduced is evidence of the hasty draftsmanship which is apparent throughout the Bill.
Corporation Tax has been a measure long advocated in one form or another by the Liberal Party. My right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) spoke at some length on this subject in the debate on the Finance Bill on 15th April, 1964. His speech is reported in column 471 of the OFFICIAL REPORT. We have no objections to a Corporation Tax. We believe that the tax in principle is right and we would welcome it, but we do not believe that in its present form Her Majesty's Government have brought in a tax which will be beneficial in the economic circumstances in which the nation finds itself.
We do not believe that it will encourage overseas investment, which we believe to be for many reasons vital to the health of the economy and the economy of the expanding nations and the underdeveloped nations of the Commonwealth. It is worth noting that the expanding and flourishing economies of West Germany, France, Italy and the United States are largely due to the fact that they have paid great attention to overseas investment and have gone a long way to encourage it. Indeed, overseas investment can often be the cornerstone of international trade.

Mr. Dell: I cannot understand how, in the light of our discussions, the hon. Member can make these claims. Is he aware that the flow of German investment in recent years has only been half that of ours?

Mr. Bessell: Yes, of course I am aware that it is considerably lower than ours; but the fact remains that it has been on an increasing scale, and the fact that it has been half ours has been due to the considerable economic difficulties which West Germany had to overcome in the post-war years, particularly difficulties at a fiscal level. I do not doubt that if they had had the resources and the great companies there to do it, their rate of expansion in overseas investment would have been much greater.
To return to the point I was making, which is one of real importance, whilst applauding the encouragement to plough back, it should not always be at the expense of a reasonable dividend payment. I know this is a subject of argument and debate, and there are many views which can be expressed upon it, but the Chief Secretary himself at one point in Committee admitted that too low a dividend always results in a decline in share values. I am sure that he would agree that a decline in share values usually results in a depression upon investment in that particular type of industry. The need to maintain a balance between the amount distributed in dividends and the amount reserved for plough-back is of vital importance. I am not convinced that, in this Bill, that essential balance has been maintained.
Moreover, it is important to bear in mind that we have to encourage overseas investments in this country not only be-

cause of the valuable currencies which they produce immediately at a time of immediate need, but also because of the benefits of technical "know-how" which so frequently come with them.
If I may add this to the two points of Capital Gains Tax and Corporation Tax, as I have said, we on this bench have believed for many years that it is vital to streamline and simplify our taxation system. What we regret is that so much has been attempted so soon, and that the result has been a meal which is not going to stimulate the nation but cause it considerable indigestion. Any interference with a long established form of taxation system which has been known and which is familiar to everyone—overseas investors and others—is always risky. At a time of grave national economic crisis, it is not only risky but extremely dangerous.
I welcome in principle the abolition of most of the tax relief on entertainment, but I regret that, in its present form, it is more likely to cause harm to the small man of business who is trying to expand a small company or trying to make sales in various parts of the country through commercial travellers and other forms of business enterprise. They are the people who will be hit.
It was the hon. Member for Nottingham, South (Mr. William Clark) who, in one of many admirable speeches that he made from this side of the House, remarked that it would not be the tycoon who would suffer but that, on the contrary, it would be the small man of business who would suffer. The tycoon can afford to pay for his entertainment, whether it is taxed income or not. It is the small man who suffers in this case. In my opinion, the hon. Gentleman was abundantly right here, and I am sure that at some time the Clause will be amended.
I believe that the Measure which withdraws the initial relief from tax on the purchase of motor cars is a little harsh. I do not suggest that the initial relief was fair as we knew it in the past. On the contrary, it was too generous. But we have got to do everything that we can to stimulate the home sales of the motorcar industry if we are to stimulate that business in its export drive, because the only way in which prices can be kept at a low level, in which the most modern


developments in the motor car can be stimulated to enable us to make overseas sales, is by having a very high rate of sales resulting from a high rate of production. If, as in this case, we are to discourage the purchase of new cars, the whole industry will suffer and, indirectly, so will our export business—

Mr. Barnett: Perhaps the hon. Member is not aware that initial allowances are only a form of loan when the car is bought. There is a balancing charge, a balancing allowance, and the removal of initial allowances does not effect the total amount of tax relief on that particular car.

Mr. Bessell: I accept this, but it will also happen that the initial allowance makes it very attractive for many people to buy a new car at a time when it would not otherwise have been attractive to do so. I believe that it was over-generous in the past, but now it will be niggardly.
Will the Bill, as it stands, encourage the small investor? I do not believe that it will. It will discourage small investment, the unit trust form of investment and many other similar forms of investment which are open to the person who has a limited amount of income which he wants to put to a useful purpose and which can be of great value to industry and the nation.
Will the Bill encourage international trade and assist our struggle against the balance of payments problem? No, it will not. At least it will not go so far as it might otherwise have done if the various measures and changes in taxation had been dealt with less drastically, with a more commonsense approach to the problem and less bias against big business and the high profit motive of certain types of business.
Will the Bill assist our gold and dollar reserves? I do not think that it will. On the contrary, it will discourage a great deal of investment in this country which might otherwise take place. Here, I speak from direct personal knowledge which I gained only a few days ago. I was in the United States dealing with precisely this kind of business, which happens to be my professional interest. I know from direct experience that there is a reluctance to make dollar investment in this country today compared

with a few months ago. To that extent, the Bill has done serious damage to our position.
Will the Bill provide the incentives for higher productivity? In the limited sense it will, because of the provisions through the taxation changes to encourage plough-back. Will the Bill provide the kind of taxation reforms which will give the worker in industry a fairer share of the profits he earns? No, it will not. The measures of incentive to co-ownership which we on this bench should very much have liked to see incorporated in this year's Finance Bill are lacking. We regret that greatly.
Will the Bill give confidence in those quarters which matter, in those of the international banking circles and great industries upon which the economy of this nation rests and depends, in the insurance houses of this country, in short, the backbone of our industrial and commercial structure? I regret to say that, in my belief, it will not give that essential confidence which is needed if our economy is to recover. I have complained that the Bill goes too far in what it attempts and that it misses altogether the progressive reforms which would provide us with the tools necessary to give us a return to economic stability.
Why have Her Majesty's Government shown so much haste? If they believe that they have a long-term future, many of the changes which they seek to make could have been introduced over a period of years without harm to the economy. Opportunity would then have arisen to make the changes which I believe should have been made in the Bill to give a new confidence in the future of the nation's economy.
We on this bench have, throughout the stages of the Bill, tabled about 40 Amendments and one new Clause. There have been nearly 140 speeches and interventions by the 10 Liberal Members. I pay special tribute to my colleague the hon. Member for Orpington (Mr. Lubbock), who has sat through so much of the debate and taken such an active part in it, and to my hon. Friend the Member for Caithness and Sutherland (Mr. George Y. Mackie), who has been so painstaking in his work, too.
To return, finally, to my first point, I believe that the main fault of the Bill


is that it is too ambitious at the wrong time, that many of its provisions are right and desirable and that many of them would go a long way to effect reforms which are long overdue, but my regret is that this took place at a time when it was not suitable for the nation's economy. I conclude with words which are attributed by the pen of William Shakespeare to Cardinal Wolsey when he said to Cromwell:
I charge thee, fling away ambition: By that sin fell the angels.

9.11 p.m.

Mr. William Hamling: The hon. Member for Bodmin (Mr. Bessell) commented favourably on many parts of the Finance Bill, saying that the Liberals support the Capital Gains Tax, the Corporation Tax and the limitation on expenses, yet out of 106 Divisions the Liberals voted against us 93 times. I begin to wonder—

Mr. Bessel: What I said was that we supported those principles. I did not say that we supported the form in which they were presented.

Mr. Hamling: I was under the impression that a great many Divisions were on points of principle. Perhaps it is that the Liberal view of principle is rather different from that of the rest of us.

Mr. Emrys Hughes: They mix up "interest" and "principal".

Mr. Hamling: One thing that struck me about the debate was that so many hon. Members opposite supported some of the principles in the Bill and that their criticisms were directed mainly to detail. It seems to me that throughout the Committee and Report stages the same has been true. We have had some hon. Members supporting the Capital Gains Tax. The hon. Member for Sheffield, Heeley (Sir P. Roberts) said that the Corporation Tax was not a party issue. If it is not a party issue, goodness knows what all the fuss has been about in the last few months. Hon. Members opposite have been making a great deal of fuss about Corporation Tax. The hon. Member for Ormskirk (Sir D. Glover) described the Bill as a monster. How can a monster be not a party issue? It is about time that the party opposite made up their minds whether or not they oppose the Bill and whether they oppose it on the ground of principle.
When the Bill started on its long journey, there were howls of indignation from business people, financial interests and hon. Members opposite. We were told that this was naked Socialism, to quote one hon. Member opposite. If it is naked Socialism, I do not see why hon. Members opposite can call this a non-party issue. We were told that this was a very long Bill. There have been much longer Finance Bills. There was the 1909 Finance Bill. The remarkable thing is that the Liberals, who have voted against us so often, tried to introduce in that Bill one of the issues that we have finally succeeded in getting the House to accept, the tax on land. The only opposition that the Tories had to that proposal in 1909 was that it was a Capital Gains Tax that applied only to land. Does that mean that the Tories in 1909 were supporting a Capital Gains Tax but that some are not today? It is quite possible. Some of them do go backwards.
There were more than 500 Divisions during the passage of the Finance Bill, 1909. The 106 on this Bill pale into insignificance in comparison. A great deal of fuss has been made by the Opposition about the Bill which, in retrospect, will be seen to have been only fuss and not an agitation about any matter of principle. The right hon. Member for Bexley (Mr. Heath) said that the Tories will not seek to repeal the Corporation Tax. What, then, is the fuss about? He said that they would seek to modify it but he never let us into the secret of how they would do so if they got the chance.
A great deal of bitterness and abuse has been let loose on the Bill but again, looking back at the 1909 Act, one sees that the bitterness, hatred and abuse generated in those days was far more powerful and far more significant than anything we have seen on this Bill. Of course, we had such masters then as Lloyd George and F. E. Smith—and in comparison with them Jim Callaghan is the greatest gentleman—[Interruption.]—the Chief Secretary is a sucking dove compared with F. E. Smith. I know. F. E. Smith represented a division in my home town. We called him "Frothy Fred".
The Finance Act, 1951, occupied 13 days. This Bill, about which so much fuss has been created, has occupied us


so far for only 21 days. The agitation from the Opposition has been largely artificial. Let us look at the voting record. We have had 106 Divisions and the Government's average majority has been nine. We lost only three, and that was because of the "cowboys and Indians" act of the Opposition Chief Whip who had to justify his existence to somebody.
In the fight for the leadership stakes we have had further examples of voting records. The right hon. Gentleman the Leader of the Opposition voted 40 times. [Interruption.] We are reviewing the provisions of the Bill and how seriously right hon. Gentlemen have taken their opposition. I am telling the House how seriously some of the right hon. Gentlemen took their duties in the Lobby. The right hon. Member for Barnet (Mr. Maudling) voted 30 times and the Chairman of the Conservative Party, the right hon. Member for Taunton (Mr. du Cann), voted 43 times. Is this fighting opposition?
The Government's sense of timing today has perhaps been good. We have had the Report of the Committee of Privileges at the same time as this debate. It is remarkable that so many back benchers opposite have taken part in this debate. They have almost tripped themselves up in their eagerness to denounce certain parts of the Bill.
We all know why. [HON. MEMBERS: "Why?"] I will explain. Just wait for it. They have made clear what we have always said of them. They have shown where their interests really lie. They have exposed it in their speeches and in the Division Lobbies, and in the fat briefs that they have been handling, supplied by other people.

Sir C. Osborne: Holy Willy!

Mr. Hamling: Have we been unfair to the Opposition in our speeches about them? I think that we have, because if we look at the Directory of Directors we find that there are only four bankers on the Opposition benches. There are no really important representatives from the joint stock banks. There are no directors of the leading insurance companies—

Mr. Speaker: Order. We have had a most agreeable Third Reading debate, and it is customary to allow a good deal of

licence on it. But this is a Third Reading debate on the Finance Bill, and I must ask the hon. Member to remember it.

Mr. Hamling: I am most grateful to you, Mr. Speaker. What I was trying to do was to indicate the progress of the debate on the Bill so far, and the points of view of hon. and right hon. Members opposite that had been put on the Bill. If I went a little too wide I apologise.
I want to say a word about some of the arguments presented today and about the alternatives offered to the policy of Her Majesty's Government. We have been told that in their taxation policy the Opposition believe in fairer shares in taxation. All I can do in replying to that sort of remark—and it was made by the right hon. Member for Bexley—is to point out the record of the Conservative Party in this respect.
Hon. Members opposite say that they advocate fairer shares in taxation. Let us examine the record. In six Budgets in which they reduced Income Tax or Surtax—[Interruption.]—hon. Members should wait until the sentence is finished. I am referring to Budgets in which Income Tax or Surtax was reduced. In those six Budgets, as a result of their concessions the £1,000-a-year man had his tax reduced by 10s. a week whereas the £10,000-a-year man had his reduced by £50 a week. That is an example of Tory fair shares.

Mr. Robert Cooke: How many people were taken out of tax altogether?

Mr. Hamling: Not as many as were taken out of tax by the late Hugh Dalton. [Interruption.] Yes; look at the 1946 Budget.
Now let us consider an Answer given to a Question in the House in recent weeks concerning the graduated pensions scheme. In the Second Reading debate I said that one of the things that the party opposite did when in power was to use the social security system as a fiscal measure. In the last fortnight we have heard that over £800 million was taken from graduated pension contributors by way of excess contributions and transferred to other aspects of the scheme. This we regard as a form of taxation. If that is Tory fair shares in taxation,


we do not want it, and we do not believe that the public want it.
I promised not to be long and I should like to say this in conclusion. There have been no criticisms of the basic principle of this Bill in today's debate. There have been criticisms of detail, there have been contradictory expressions of principle by hon. Members opposite, some supporting Capital Gains, some opposing, some supporting Corporation Tax, some opposing. Yet they intend to divide on Third Reading. That is not my interpretation of differences in principle. My right hon. Friend has introduced a Bill which will go down in history as an epoch-making tax reform Bill. This is something that hon. and right hon. Gentlemen opposite ducked for 13 years. It is no good the hon. Member for Bodmin saying that it could have waited even longer.
Too much, too soon, is the cry. Rather too much in a hurry than too little over too long a period.

9.26 p.m.

Mr. Anthony Barber: It is more than 14 weeks since the Chancellor of the Exchequer opened his Budget. Now, after four days' debate on the Budget, after the Second Reading debate on this Bill, after I think 16 days in Committee and five days on Report, we come to the end of our labours on this year's Finance Bill. A few minutes ago I was handed a letter from my hon. and gallant Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), about a personal matter, which concludes with a paragraph which, I think, will be echoed by all those who have taken part in these marathon debates. He writes:
How very extraordinary that the Finance Bill should ever come to an end.
I must say I was a little alarmed at the speech made this afternoon by my hon. Friend the Member for Belfast, North (Mr. Stratton Mills), when he said—referring, of course, to a different aspect—that this Bill, "will be with us for the next 20 years". I think, for those of us who have taken an active part in these debates, that it is with a mixture of relief and nostalgia that we take our parting this evening. Certainly I can truthfully say that in the 13 years I have been in the House of Commons I do not

remember any Finance Bill, taking it as a whole, in the course of which I have heard better speeches than in this one.
The right hon. Gentleman will not be surprised if, in the time which remains, I devote my remarks to what we consider to be his lamentable performance in this Bill to match the needs of the nation. The hon. Member for Woolwich, West (Mr. Hamling), who preceded me a moment ago, complained that we on these benches have not given our reasons of principle for opposing this Bill. If he will bear with me a few minutes, I think he will get some this evening before we divide.
It would be ungenerous of me at the final stage, in this House at any rate, of the last Finance Bill which the right hon. Gentleman will ever have the opportunity of sponsoring, not to pay tribute to the single-mindedness and tenacity of purpose of our amiable Chancellor of the Exchequer. Whatever view we may take about his dogged determination, and I shall have something to say about that in a moment, I do not think there is anyone, on either side of the House, who doubts for one moment the complete sincerity with which he clung to the political objectives of his Budget, and of his Finance Bill. There can rarely have been a Bill more amended in Committee and on Report, and yet it is a fact that the right hon. Gentleman has not compromised on a single one of the really fundamental principles which formed the basis of his original Budget proposals. It is this fact, no doubt, which causes the delight of hon. Members opposite and has caused some of his hon. Friends to hail the Bill as a victory for Socialism.
But it is also this fact which has brought concern and dismay to those who put their faith in a free enterprise economy. For a country which is predominantly a free enterprise country, the principles on which this Bill is founded are inept and restrictive and until they are reversed we on this side believe that they will do untold harm to industry and to commerce on which, at the end of the day, the prosperity of the British people depends.
From time to time we on this side of the House have poked a little fun at the Chancellor of the Exchequer for hardly ever taking part in our debates. But if he has, behind the scenes, been


quietly working away in the national interest, we do not begrudge him his absence. I am bound to say, however, that I cannot remember a Chancellor of the Exchequer who has contributed less to the discussions on a Finance Bill. But then the right hon. Gentleman was only giving a lead to his own back benchers, because it is true to say that, apart from a handful of hon. Members opposite, the contribution of members of the Labour Party, until today's debate, has been precisely nil.
Whether they did not understand or care, or whether they were got at by the Patronage Secretary, we shall never know. Today, however, I am pleased to have to admit that things have been very different because we have had a series of speeches from hon. Members opposite in what I think most people who have listened to it will agree has been an excellent debate.
But, as practically every commentator has pointed out, apart from the occupants of the Treasury Bench, the real work in Committee and on Report has been left almost entirely to my hon. and right hon. Friends. I know that they at least would wish me to pay tribute to the admirable way in which our work on this side of the House has been co-ordinated by my right hon. Friend the Member for Bexley (Mr. Heath).
As for the Chief Secretary, the Financial Secretary and the Minister without Portfolio, I think it is true to say that they have shown unfailing courtesy except under what I might call extreme provocation or when they were in a state of near exhaustion. Certainly they will find when next year's Finance Bill comes round that the experience that they have gained on the Treasury Bench will stand them in good stead in Opposition.

Mr. J. J. Mendelson: In view of the statement which the right hon. Gentleman has just made, may I direct his attention to the National Opinion Poll published this morning which gives a 4·6 per cent. lead to the Labour Party and rather interesting comparisons between my right hon. Friend the Prime Minister and the Leader of the Opposition?

Mr. Barber: I suggest that the hon. Gentleman, assuming that he is still on

speaking terms with the Prime Minister, draws these facts and figures to his right hon. Friend's attention. Then, maybe, we can have a General Election.
The Bill is the outcome of debates which, broadly, have fallen under two heads: those concerned with the technicalities of taxation and those concerned with the broad principles, particularly the principles underlying the Capital Gains Tax and the Corporation Tax. The root cause of most of the defects which remain in the Bill stems from a single event, and that is the precipitate and ill-considered announcement by the Chancellor of the Exchequer within a few weeks of taking office that he intended this year simultaneously to introduce two major tax changes.
Even the right hon. Gentleman, I am sure, would not have the effrontery to pretend to the House of Commons that at the time he made that announcement last November he had the slightest idea how he would implement it. It was all part, as we now realise, of the Prime Minister's first 100 days of dynamic gimmickry. Ever since Budget day the thesis of the right hon. Gentleman has been that innovation is a good thing in itself. It was Edmund Burke who remarked:
To innovate is not to reform.
What the right hon. Gentleman has served up in the Bill is not a series of major tax reforms but a series of tax changes hastily devised, inadequately considered and executed with manifest incompetence.
Like so many of the Government's pronouncements, the Chancellor's call for tax reform sounded, when he made it, both inspiring and courageous when couched in terms of political generalities. As embodied in the Bill, however, his principal proposals have turned out to be either irrelevant or positively harmful to the real needs of the economy. If the Chancellor doubts my words, I ask him for a moment to ponder the effect of the Bill on the four major economic factors of industrial costs, prices and incomes policy, investment and savings.
First, industrial costs. At a time when, above all, the need is to hold down industrial costs—nobody would disagree with that—the Bill provides for a whacking great increase in the


Excise Duty on commercial vehicles—and all this on top of the first increase in the standard rate of Income Tax for 13 years, not to mention the increase in the petrol duty or the further increase in the employer's contribution to the National Insurance stamp. If the right hon. Gentleman still seriously believes that in this Bill he is not acting directly to push up industrial costs and to make the country less competitive, I can only say that he must be the only person left in Britain, apart from the script writers at Transport House, to hold that belief.
Secondly, what of the shambles of the First Secretary's incomes policy? Those who think that the Minister of Technology is the only member of the Cabinet who is rocking the boat had better think again, because as the Chancellor's direct contribution to increasing the cost of living he is by the Bill imposing an additional £100 million a year of taxation on beer and tobacco.
Thirdly, what is the effect of the Bill on industrial investment? What price now the Prime Minister's lip service to the modernisation of industry? The right hon. Gentleman's contribution in this direction is quite simply, as one of his hon. Friends pointed out only half an hour or so ago, to devalue the investment allowances by 30 per cent. and then, without turning a hair, to tell us that he will look into the whole question in the coming year. I certainly agree with the concern which was expressed not so long ago by the hon. Member for Ashton-under-Lyne (Mr. Sheldon).
The Chancellor seems to us on these benches to be oblivious of the fact that business men are now making their decisions and investment plans for more than a year ahead. Although in the coming year the right hon. Gentleman is to make his inquiry, he is determined to press ahead before his inquiry is complete and to do so with what I can only describe as the arrogant disregard of the chorus of criticism from those in industry who really know how it works.
Fourthly, what is the right hon. Gentleman's contribution in the Bill to the savings drive? It is to introduce a Capital Gains Tax which in its form and its stringency is both inequitable and, as my hon. Friend the Member for Belfast, North (Mr. Stratton Mills) has

pointed out, riddled with anomalies, a proposal which must in this form act as a deterrent to saving.
I agree with what the hon. Member for Bodmin (Mr. Bessell) said about the enormous difference between the Capital Gains Tax in the United States and the one introduced by the right hon. Gentleman. The Chancellor has done this in a year when he has also increased the burden of direct taxation, and when there has been no change in Estate Duty other than his proposal for a double charge on death of the same assets to both Estate Duty and Capital Gains Tax. As my right hon. Friend the Member for Bexley (Mr. Heath) pointed out, it is little wonder that in the three months since the Budget the savings figures are down by no less than £57 million compared with the same period last year.
I do not doubt that the right hon. Gentleman, in one of those characteristic off the cuff winding-up speeches, will tell us once again that we are rounding the corner. When I think of the First Secretary of State and the Chancellor of the Exchequer discussing the business of the nation, I am reminded of the two ladies who were discussing their husbands' businesses. One lady said to the other that her husband was doing so well that she had bought a new coat on the strength of his increase in salary. She then paused for a moment, and added, "It is just as well that I did, because at the end of the day he did not get his increase in salary". She then asked her friend how her husband was getting on, and the reply was, "He is doing fine. As a matter of fact, he is making so much money that the bank has had to appoint a Receiver".
The tragedy of the situation is that last autumn, when the right hon. Gentleman became Chancellor, there was an immense amount of good will in the business community towards the Labour Government. Since then the words and actions of the right hon. Gentleman and his colleagues on the Front Bench have almost been designed to court hostility. I shall not quote again the impromptu cry of delight from the Minister of State for Economic Affairs at the prospect of the break up of family businesses, but then we had his comment on the objections of the chambers of commerce as being mere hysterics. Who is the hon. Gentleman to talk about


the chambers of commerce engaging in hysterics when they make serious proposals for amending the Finance Bill? Then we had the Financial Secretary throughout our debates gibing at what he called "rich tycoons", and only the other day some other Minister, I do not know who he was, referred to "City saboteurs". It is no wonder that the Prime Minister and the right hon. Gentleman have taken to dining in the City.
The truth—and it is about time that the country woke up to the fact—is that this is what right hon. and hon. Gentlemen opposite really think. What other possible reason can there be for the obvious relish with which the Chancellor announced the wholesale disallowance of entertainment expenditure for tax purposes? The right hon. Gentleman knows, the Inland Revenue knows, and every accountant in this House knows—and my hon. Friend the Member for Ormskirk (Sir D. Glover) pointed this out—that the abuse is confined to a small proportion of businessmen. [HON. MEMBERS: "Not at all."] All right. If hon. Gentlemen opposite assume that all businessmen are dishonest, that only goes to prove my point.
What other possible reason can there be for the wholesale anti-avoidance provisions in this Bill which bite equally on the honest and the dishonest? As the hon. Member for Manchester, Cheetham (Mr. Harold Lever) recognised, the whole basis of the particular type of Corporation Tax in this Bill is an assumption that the leaders of industry and commerce cannot be trusted to make sound judgments as between retentions and distributions, and that in any event the shareholders do not matter in a Socialist society. The result is that we have a Corporation Tax which is unsound in principle, the effects of which are unjust, and which, by reason if its deterrent effect on investment by way of risk capital, is economic folly.
It is little wonder that as our debates have proceeded it has gradually dawned on the people of this country that for all its complexity the essentials of this Corporation Tax are a direct attack on private enterprise. Despite all the protestations of economists and industrialists, we are now saddled in this Bill with a single

rate of Corporation Tax, coupled with a high rate of Income Tax.
I sum up briefly the threefold consequences of this system. First, it is inequitable to the shareholder who is to be burdened with an excessive degree of double taxation. Secondly, it is bound to encourage the inefficient use of our scarce capital resources because the inevitable consequences will be to direct those resources away from the uses where they would most contribute to prosperity. Thirdly, as the right hon. Gentleman must surely now admit, his system involves a complete reversal of the trend of company taxation as it is evolving in most countries with which we have to compete in export markets.
All this is based on the delightful theoretical, but wholly artificial, hypothesis that a company is in reality as well as in law distinct and separate from its shareholders. We had it all again this afternoon in the opening speech by the Chief Secretary to the Treasury. It was the same old tune, but, as someone said, it had changed slightly for it was in a different key. The argument was the same which the right hon. Gentleman's hon. Friends have pursued throughout the discussions on the Corporation Tax. He said that there is no element of double taxation, but this is a myth which no one other than those on the Treasury Bench and their gullible supporters seriously believes to be the case. Also, as my right hon. Friend the Member for Sutton Cold-field (Mr. Geoffrey Lloyd) said, it is a dangerous myth.
Then there is the assertion of the Chief Secretary—made again, finally I hope, today—that life for businessmen is going to be simpler with Corporation Tax. If we take him at his word the outlook for the accountancy profession is bleak indeed. I noted, however, that the hon. Member for Heywood and Royton (Mr. Barnett) offered to provide any hon. Member with what he called a "Do It Yourself Kit" for calculating tax. I shall certainly be grateful to receive one. Then there is the third fallacy of the right hon. Gentleman. Does the Chancellor seriously deny that in this country we have probably the most sophisticated capital market in the world? Certainly it is the envy of most of our competitors abroad. Unless the right hon. Gentleman does deny it, it


is nonsense to pretend that by increasing retentions we are likely to achieve a more efficient use of our resources than we would through the normal working of the market. I will tell the right hon. Gentleman what he will achieve. Many of the less dynamic companies will certainly be encouraged to increase retentions, but, as was pointed out by my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman), this will lead to less profitable investment. If the Chancellor's fiscal policy for domestic investment is based on a fallacy, the basis of his provisions for deterring overseas investment are equally fallacious. I agree with the cogent reasoning of my right hon. Friend the Member for Sutton Coldfield on that. The Chancellor contends that there is at present a bias in favour of overseas investment but, except in a few isolated and marginal cases, this is simply not true. Yet he continues to say it.
The hon. Member for Meriden (Mr. Rowland), on Second Reading, said what I think sums up the true position:
In fact what is happening is that a position of rough parity between home and overseas investment is going to be moved towards bias against overseas investment, and this is quite different from what the Government are suggesting is the case."—[OFFICIAL REPORT, 10th May, 1965; Vol. 712, c. 105.]
Then we have the second fallacy expounded by the Chief Secretary, who blandly assured us that the Government's policy
is not to enforce a rundown of our overseas assets".
But, of course, just because the Bill penalises existing overseas investment as well as new overseas investment, this is precisely what the right hon. Gentleman will achieve, and then, in his innocence he wonders why overseas creditors are losing confidence.
I ask the right hon. Gentleman two simple questions. Where would this country have been in the last war if his predecessors had adopted his own shortsighted policy and if we had not built up our overseas investments in the preceding years? Indeed, I might ask him also where would our current deficit be today without the income derived from those investments? Is it nothing to the right hon. Gentleman that last year the net income from investments abroad in the shape of interest, profits and

dividends jumped by £46 million to £435 million?
The most alarming aspect about the provisions in the Bill concerning overseas investment is not that the Chancellor, having made up his mind, is now going to co-operate with the F.B.I. in the investigation into the whole question of overseas investment, but, even when the facts are available, the right hon. Gentleman studiously ignores them.
I want to press the Chancellor of the Exchequer, as did my right hon. Friend the Member for Bexley on the remarkable statement which he made in the course of one of our debates on 22nd June. There are, I think, some hon. Members here now who were not present to hear my right hon. Friend when he referred to this point this afternoon. I should like to repeat briefly the passage to which I am referring. This is what the Chancellor said:
My view is, after the conclusion of 14 hours of debate on this aspect, that overseas investment will continue on a very substantial scale. I have no doubt of that. I am reinforced in that by the views of the chairmen of companies who have been in touch with me. Their fears have been of the effect of Stock Market quotations if they had to reduce dividends. The interesting thing is that nearly all of them"—
I would ask the House to note those words—
have told me that they intend to continue with overseas investment, and that is the basis of the Bill. The shareholders will suffer, they say, but they intend to go ahead."—[OFFICIAL REPORT, 22nd June, 1965; Vol. 714, c. 1572.]
Immediately, as my right hon. Friend pointed out this afternoon, the spokesmen for companies, whose overseas assets total nearly half the nation's direct overseas investments, publicly stated that they, at least, had said no such thing to the Chancellor. So the question arises, which I hope the right hon. Gentleman will answer tonight: who did say these things to the Chancellor of the Exchequer? I raise this again because twice during our debates on the Report stage we asked for information about this, and it was never forthcoming from the right hon. Gentleman's colleagues on the Front Bench. Therefore, I hope this matter will be cleared up this evening.

Mr. Callaghan: Why?

Mr. Barber: I will tell the right hon. Gentleman why? I put down a simple


Question to the Chancellor for Written Answer. I will read it to the House:
Mr. Barber asked the Chancellor of the Exchequer how many chairman of companies have now told him it was their intention to go ahead with overseas investment and that it was their shareholders who would suffer; and approximately what proportion of the nation's direct overseas investment is represented by the overseas assets of these companies.
I ask the House to note the terms of the right hon. Gentleman's reply. This is what he said:
A number of company chairmen have told me of their intention to proceed with selective overseas investment, and for this reason they urged more favourable treatment of shareholders who would otherwise suffer. As to the second part of the Question, I have not made an estimate."—[OFFICIAL REPORT, 5th July, 1965; Vol. 715, c. 172–3.]
I ask the House to note two significant things about that reply. When the right hon. Gentleman made his original statement, on which none of his right hon. Friends were prepared to comment, he referred to "nearly all" of the chairmen who had been in touch with him. Now, when he is pressed, it is no longer "nearly all" but merely "A number." When he is asked how many, the right hon. Gentleman refuses to reply.
I must say that it is extraordinary that the right hon. Gentleman is basing his Corporation Tax policy on what this indeterminate number of gentlemen told him, although apparently he has not the slightest idea of the extent of the overseas assets which they represent. Twice the right hon. Gentleman has been asked about this. He was asked by my right hon. Friend again this afternoon. I hope we shall have the figures tonight because it is monstrous that the House of Commons should be asked to pass this legislation which is obviously based on an assumption which has now been shown to be utterly without foundation.
I do not doubt that in due course, and sooner perhaps than the right hon. Gentleman thinks, we shall have the task of righting the errors of the Bill, and thereafter, I dare say, the principles of the Bill will fade into obscruity. But I am certain of this. This Bill will be remembered for many years as one of the most incompetent and slipshod pieces of legislation with which the House has ever had to contend.
Although the Chancellor has adhered with doctrinaire rigidity to his original principles, the right hon. Gentleman as my right hon. Friend the Member for Bexley has reminded us, has been forced to table no fewer than 440 Government Amendments to his own Bill. Now, no doubt, the Chancellor will claim the virtue of flexibility, but I think that most people will prefer the interpretation of one journal which described the Bill as
the most appalling piece of fiscal bumbling that has ever been before the House.
As the aged and infirm are wheeled in to support this petering Government we shall divide the House in the certain knowledge that we are voting against a bad Bill and a bad Administration.

9.56 p.m.

The Chancellor of the Exchequer (Mr. James Callaghan): I think that I should take up at once the charge of the Bill's being bumbling and ill-prepared. It should be made clear, and I should like to summarise, which, I think, I can do very fairly, what is the charge that has been made. The Government Amendments
… are a Measure of how ill-prepared the Bill was when it was first presented to us, with how little forethought it had been conceived and, with how little knowledge of the circumstances and facts of the matters with which it was dealing.
That is exactly what a Conservative Opposition said about David Lloyd George's Bill in 1909.
I suppose"—
said Mr. Austen Chamberlain—
that no Bill has ever been so cut and carved in the course of its passage as this Bill."—[OFFICIAL REPORT, 2nd Nov., 1909; Vol. XII, c. 1655.]
I would point out to the hon. Member for Bodmin (Mr. Bessell) that the difference is that on that occasion Mr. Arthur Henderson, speaking for the Labour Party, pledged their support for a great radical reforming Measure, but that was when the Labour Party was young and growing—

Mr. Bessell: It is because the Liberal Party is young and growing that we reject the Bill.

Mr. Callaghan: I deeply regret that we are not to have the support of the Liberals in the Lobby. It seems to me that on a Measure of this sort they should


be with us, as I am quite certain David Lloyd George would have been with us. I recommend the hon. Member to read the Finance Bill debates of 1909, when he will see how a great radical reformer in those days behaved towards these people.
It is customary—and I do it quite genuinely—at the beginning of the winding-up speech on the Third Reading of the Finance Bill, to pay a tribute to the course of the discussions on the Bill. I should like to say personally how glad I am that it has been possible to get through the discussions on the Bill without using the Guillotine.
I set my mind against this at the beginning—and the right hon. Gentleman should not get excited about this, because I am paying him a compliment—and, because of the manner in which the debates have been conducted, it has been possible for us to get through without it. I have sat on the benches opposite for 13 years. Any Opposition can wreck any Finance Bill at any time. The machinery Clauses are of such a character and the nature of the discussions are such that the House can spend any amount of time discussing any subsection of any Finance Bill. I must say that we did it, and the right hon. Gentleman himself is not entirely innocent of the practice, either.

It being Ten o'clock, the debate stood adjourned.

Ordered,
That the Proceedings on consideration of the Lords Amendments to the Control of Office and Industrial Development Bill may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—(Mr. Gourlay.)

Question again proposed, That the Bill be now read the Third time.

Mr. Callaghan: If I may say so, the Opposition Front Bench have done a good job on the Bill, in the interests of everyone. The right hon. Gentleman the Member for Bexley (Mr. Heath) has led his team with very great skill. As Thomas Hardy remarked:
No one could be said to understand the heath who had not been there at such a time.
We have seen him, we understand him, and we know him to be fearful of reform and steadfast for the status quo. It was in the "Return of the Native," but I do

not think Thomas Hardy was referring to the immigration policy of the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd).
As I say, the right hon. Gentleman has led his team very well indeed, and the right hon. Gentleman the Member for Altrincham and Sale (Mr. Barber) has always given a cutting edge to the debates, as he has done again this evening in concluding his party's case. It would be wrong of me to go right along the Opposition Front Bench, but I think that it has done a first-class job on the Bill, and in Committee it seems to me that back bench reputations on both sides have been made.
I agree with the right hon. Gentleman the Member for Altrincham and Sale that we have had a series of excellent debates on a very high level, certainly as high as I can remember during my membership of the House of Commons. Perhaps that is because hon. Members' minds have been focused not on irrelevant issues, but upon very relevant issues. Perhaps it has been the subject-matter of the Bill that has raised the level of debate; and I will show later that, far from this being an irrelevant Bill, it is an extremely relevant one in the circumstances in which we find ourselves.
I know that the House will allow me to thank those hon. Gentlemen who have paid tribute to the Chief Secretary and the Financial Secretary and to the Solicitor-General and the Minister without Portfolio for the work that they have done during the course of these debates. It has been a feat of physical and mental endurance, and I think that they have shown remarkable fortitude. I should like to thank them publicly for the work that they have done.
The first few Clauses of the Bill, as the right hon. Member for Bexley reminded us this afternoon, deal with fiscal and economic regulators that affect the state of the economy, and I should like to follow him in dealing with some aspects of these matters.
I did not get clearly from either of the right hon. Gentlemen, the right hon. Gentleman who opened and the right hon. Gentleman who concluded, whether they thought I was right or wrong to raise taxation this spring. They have been much too coy about this. For a party that


presents itself as the alternative Government, they should tell us quite clearly, as the Opposition's chief economic spokesmen, whether they believe that the economic situation of the country and the state of the economy today demand higher or lower taxation.
We have had no clear answer from the right hon. Gentlemen about that. They have voted against the increased taxes, but that was perhaps to secure a little popularity in the country—I would not know. If they take the view that taxes should not have been raised this April, then they are alone in their economic diagnosis, except, of course, for the Leader of the Opposition, who always believes it, anyway. The right hon. Gentleman knows perfectly well that the economy is extremely tightly stretched. It was in April when I introduced these measures, and it still is.
There is absolutely no case, in my view, for relaxing—certainly not in April, and not today—the restraint which has had to be placed upon the economy and which I have exercised through the means of these tax proposals. They are having an effect—of that there is no doubt—but we must beware of taking too short a time scale for their operation. There is a temptation to assume, because the effects of these measures are not immediately obvious, that we should rush into further measures which would have the effect of restraining the economy even more.
This would be an unfortunate thing to do and I am resisting the temptation to do it. There is a great temptation to be impatient here, but I must say to the House that I hope that everyone recognises the risk which is being run by the country in incurring a substantial overseas deficit this year. I have deliberately taken that risk. It is one which was taken by the present Opposition when they were the Government. In my view, they ran far too great a risk. They ran up, in order to avoid interfering with the economy, a record balance of payments deficit. They did it for the best of all possible reasons, that they did not want to damp down the economy.
But I think that everyone here knows that I have had to borrow about £900 million from overseas to finance that deficit. This year, I have budgeted for a

deficit which will still be substantial but much less, of course, than last year's. I am aiming at an overseas deficit of no more than £300 million, but to be aiming at a deficit is not the most comfortable of situations to be in, especially when it is piled on the record deficit which I inherited from the preceding year.
The right hon. Member poked a little fun at me and said that, no doubt, I would make another of those "off the cuff" speeches about "turning the corner". I will not use that phrase. I will quote the figures. The average trade gap on a balance of payments basis last year was £46 million a month. For the first six months of this year, the trade gap on the same basis has been £26 million a month. I am glad that the measures which we have taken are showing that improvement. Imports are slightly down. The right hon. Gentleman, I thought, was not quite right in his analysis this afternoon, though I will not spend too much time on that. Exports are up, though not up enough. I must warn the House that, although this is a marked improvement over our trading deficit of last year, we simply cannot go on forever running at a trading deficit.
The structural changes which I think are necessary in parts of industry will take time to achieve and that is why we must have patience and be ready to finance the deficit, as we can this year and as we can, if necessary, next year. There is no difficulty about financing the deficit, but I am justified in doing so only on one condition—that industry uses the time which is being given through me and the country taking the risk of operating at a deficit to get itself into a competitive position, where £46 million does not become £26 million, but gets into balance and, finally, into surplus.
This is why I say and why the Government take the line—despite jeers from some hon. Gentlemen opposite, but not all—that an incomes policy is of such vital importance. When we owe £900 million to creditors overseas, it is not honest to go on paying ourselves higher incomes, at whatever level. We are cheating our creditors and we shall, eventually, cheat ourselves unless we get into balance on the trading account and on the capital account as well. I want the people as a whole to know that there is a simple message here which has to


be got across if the country is to get out of its perennial balance of payments crises. I hope that everybody in the House will recognise that I am not attacking this from a party point of view. On the other hand, we have a deficit. I shall run one this year and I shall run one next year. To that extent, therefore, I am continuing that policy, but, I hope, improving it radically.
We cannot carry on like this. It has to come to an end and it will come to an end, I hope, because industrialists, trade unionists, people at all levels of society will recognise that they have an obligation—a moral obligation; I have no hesitation in repeating that word—to ensure that this country frees itself of debt, that its industry is fully competitive and that we can look our creditors in the face again and pursue the policies at home and overseas which we want to pursue. We are cribbed, cabined and confined in so many policies at the present time.
I take one of them, not the most obvious—the question of overseas aid. Some hon. Members opposite tabled a deprecatory Motion the other day about the amount that was to be spent on overseas aid and the easing of the terms of our aid. Yet there is no hon. Member in the House, I dare say, who does not believe that we have an obligation to assist those countries within the limits of our capacity. Of course we have, and we should do it. We are thwarted from doing it when we are borrowing from one set of creditors in order to lend to other nations. This is the dilemma in which British policy is placed in so many ways.
That is why I place first, foremost and squarely the balance of payments as the central figure in our calculations and in our policies. This is why we are tackling the capital side of the account as well as the current side. This is where I think the Corporation Tax has its part to play, and I shall come back to that at a later stage.

Sir Arthur Vere Harvey: While I accept everything that the right hon. Gentleman has said, can he tell me how he can justify the expenditure of hundreds of millions of pounds on United States aircraft which have to be paid for by exports?

Mr. Callaghan: There is no expenditure as of this moment on United States aircraft. If certain policies are pursued there will be a future liability to pay for United States aircraft. That is a different matter. As the hon. Gentleman knows, major decisions of that character have not yet been taken. They have still to be taken when the defence review is complete. But I do not want to be carried too far from the Third Reading of the Finance Bill. The first few Clauses gave me the opportunity to make some general comments about the economy.
I must say a word about the Leader of the Opposition. I think that it is this position that makes his attitude on taxation absolutely incomprehensible. He tells the country that he will reduce taxation at all levels as quickly as he can as soon as he gets back, whenever that may be. He believes that taxation is too high and that it should come down. If that is a general statement of principle for the Greek Kalends, I can agree with him, but he is putting this forward with headlines over his speech containing the words "as an article of faith" or "as a principle of action for national survival". If he were to apply that principle today, it would be a principle for national suicide, and he knows it. He really is misleading the country if he pretends that he can reduce taxation at the present time.

Sir Alec Douglas-Home: I do not think that this is misleading the nation at all. If the Chancellor's memory does not fail him, he will remember that we reduced taxation during our 13 years of Government by about £2,000 million.

Mr. Callaghan: I am talking about the present and the future. The right hon. Gentleman is offering a recipe to the country. Now he and his colleagues have asked for a better Farm Price Review, for more money for pensions, for more money for hospitals and for £100 million to be transferred from the local rates to the central Exchequer. They have asked for concessions on the Finance Bill which total about £654 million.
The Leader of the Opposition pretends to the country that he could reduce taxation. How will he, at the same time, increase benefits and reduce taxation? If


he really wants to appear as a credible Leader of the Opposition he should be honest in his approach to the country on these matters.
The right hon. Member for Bexley, who is rather more sophisticated in his approach, has been more careful about the way in which he has put the case.

Sir D. Glover: rose—

Mr. Deputy-Speaker (Dr. Horace King): Order. It is very evident that the Chancellor of the Exchequer has not given way.

Mr. Callaghan: I will give way later. Perhaps the hon. Gentleman will allow me to choose my time.
I was saying that the right hon. Member for Bexley, in his rather more sophisticated approach, has taken a rather stereotyped line. He says that we must not increase indirect taxation because that causes higher costs for industry and provokes higher wage claims. Likewise, he says that we must not increase direct taxation because that reduces investment funds for industry and removes incentives from individuals.
That is a perfectly good approach in one sense, but what is his judgment? That is what we have never heard from the right hon. Gentleman throughout our discussions. Of course, we can all advance and adumbrate general principles, but what is his judgment of the economic situation? That is what he should give us if he really wants to appear as a credible alternative Leader of the Conservative Party.

Sir D. Glover: The Chancellor has just said that the concessions asked for on the Bill by the Opposition would have cost £640 million. Would he, therefore, tell the nation what his estimate is of the total cost of the Bill to the nation?

Mr. Callaghan: The relevant part of the Bill will raise in terms of revenue approximately the same amount as is raised today by the combination of Income Tax and Profits Tax, so the hon. Gentleman can work it out for himself.
I come now to the particular measures of tax reform in the Bill. There has been a long-standing recognition of the need for reform in our tax system. The Opposition have made it clear today—

and I am glad that they have done so—that they accept the need for reform and that they do not intend to repeal either the Capital Gains Tax or the Corporation Tax.
I find it a little difficult to understand why, in these circumstances, they intend to vote against the Third Reading. I can understand their voting against the Second Reading and on Committee stage points. I understand that the right hon. Gentleman reserves the right to alter any Clause of the Bill and to make Amendments. I hope that he does reserve that right. I do not expect the Bill, any more than Income Tax Acts, to stand unchanged forever. If it were to do so, we should have a stagnant society. Of course it will be amended in the future and the right hon. Gentleman is saying no more than that any successor to the Government will exercise there normal rights of amendment. I hope that I am right in understanding that he has said that the Opposition do not intend to repeal either the Corporation Tax or the Capital Gains Tax.

Mr. Heath: I am sure that the right hon. Gentleman has no desire to misrepresent me. I said throughout the debates on the Bill that we do not oppose the principle of the Capital Gains Tax or the Corporation Tax. Anyone who has followed the debates knows that to be so. What we have opposed is the form of both these taxes and, of course, the way the Bill was introduced and the timing.
What I said quite clearly was that we shall examine the whole of this in the light of the economic circumstances and that we shall not hesitate either to amend or to repeal any part of the Bill which is opposed to economic progress.

Mr. Callaghan: I hope that the right hon. Gentleman's supporters now feel absolutely clear as to what right hon. Gentlemen opposite want to do.
Much play has been made of the fact that the Bill, as it stands, is anti-business. That is not true. [HON. MEMBERS: "Oh."] I wish that some of those who now shout "Oh" had heard the speech of the hon. Member for Sheffield, Heeley (Sir P. Roberts). He made it quite clear that he did not


regard the Corporation Tax as anti-business in its incidence, and, indeed, it is not. He is one of the few major industrialists who sit on that side of the House. As hon. Members who have been here for twenty years know, he has always opposed the Capital Gains Tax, but he believes that the Corporation Tax will be a great incentive to many parts of industry. I hope that that does not misrepresent his view.

Mr. Stanley McMaster: rose—

Mr. Callaghan: The hon. Gentleman is not the hon Member for Heeley.
The plain truth is that the tax on the retained profits of a company will be among the lowest of any nation in the world. This is what young companies, growing companies, and small family companies see as the great advantage. I quite realise that many hon Members opposite have misunderstood some of the provisions in the Bill. In so far as that is my responsibility, I regret it, but there is no reason why they should persist in their error. They will find themselves looking singularly foolish in three or four years' time—if I may say this without unduly raising the temperature—when company accountants have worked out the full effects of many of the measures in the Bill.
There is a need for much more capital investment in industry, and by taxing retained profits at a lower rate where they are ploughed back into new capital investment we are encouraging modernisation and the growth of industry in a way that has not happened hitherto.

Mr. McMaster: rose—

Mr. Callaghan: No; I think that I should try to finish by half-past ten, and I have been going rather too slowly. Perhaps I may be forgiven for not giving way. We have had plenty of opportunity in the last 27 days to debate these issues.
With the promise of no repeal, but possible amendment, the right hon. Gentleman has really conceded the Government's main case. How can it be said that the Bill is irrelevant? We have had more important and highly focused debates on the future of investment allowances, on overseas investment and small companies than it has ever been my lot to know within the last 20 years.

How can debates of that character be regarded as irrelevant in existing circumstances? We have had these debates because it is what the Finance Bill is about. It is about the approach that is being made to these problems; and more rethinking has been done about levels of overseas investment and about questions such as investment allowances than I have known for some years. That is what the industrial system of this country needs and is now getting.
Of course we must have changes, and this Bill has helped to focus that fact. Is it irrelevant to bring the capital account under control, and to alter the emphasis on overseas investment? Is it irrelevant to provide more investment funds for industry by reducing the tax burden on undistributed profits? Is it irrelevant to have a Finance Bill that achieves social equity? Are these things irrelevant? If so, there is no room for using the weapon of taxation as an instrument for both economic and social purposes.
The Bill is a highly relevant Bill. Hon. Members opposite know it. That is why they have opposed it so bitterly, as being against their philosophy. I have been told that I have acted on insufficient evidence in altering some of the provisions that have existed, for example, in relation to overseas investment. The present system of overseas investment does not work. Whether it is right or wrong, it has not produced the exports that we need.
It is up to those who now claim that a high level of overseas investment needs to be encouraged by special tax reliefs to prove their point. It is for them to prove it, because what we have failed to do so far, through one of the highest out-flows of capital that any advanced industrial nation has ever made, except the United States, is, I regret to say, to achieve a level of exports that simply does not begin as yet to match up to our requirements. What is more it is less advantageous and less beneficial than the exports of capital made by a great many other advanced industrial countries.
Thus, it is for those who claim that they still need special tax concessions to prove their point. I will help them by making available all the evidence that exists on this matter. Let them put it to


the test and let us see what the result is. I am ready to stand up to the result of an impartial and judicial investigation which should be directed, as my hon. Friend the Member for Birkenhead (Mr. Dell), said, in a memorable speech this afternoon, to what is needed from overseas investment by this country.
I have been questioned about the chairmen of companies who came to see me. Frankly, I did not see that it was worth while spending a lot of time on this, but as both right hon. Gentlemen have made a meal of it I will say something about it. I was giving in Committee my impressions of the attitude of scores of company chairmen who have been in front of me. [An HON. MEMBER: "Scores?"] Yes, scores. I have seen more deputations than I care to remember, and I hope that I have treated them courteously, and have listened to everything that they have had to say. I have seen very many company chairmen and various representatives of various interests.
I formed a general impression, and I give that general impression to the House, of the company chairmen who came to see me. Three of them wrote to The Times, saying that they came to see me on behalf of 15 very large companies, and denied that they gave the impression that I said I had formed. So be it. If that is their view I do not contradict it. Where do we go from there? I have said what my impression was, I have said what they have said.
My general impression—and individuals are free to disagree with it—was that of those who came to see me about overseas investment, a large number of companies, for one reason or another found that they would have to continue, or wanted to continue with overseas investment. It would be much more selective in future than it was in the past. They were pressing the case on me for transitional relief: they said if this was not conceded their shareholders would have to suffer, and this is why they were pressing the case for transitional relief upon me.
This is taking up the time of the House a little unnecessarily. I made an explanation, as far as I can, and if the right hon. Gentleman thinks there is any-

thing sinister about it, no doubt he will put down more questions and I will do my best to give him the answers.
A point made was that the Bill separates personal and company taxation. It is important that should be so for a number of reasons, some of which I have already outlined. It is important because it means that allowances given for one purpose will be much more difficult to use for other purposes. If I am asked what I mean, I refer particularly to the use of investment allowances for paying dividends. When the right hon. Gentleman the Member for Barnet (Mr. Maudling), instituted the present very high level of investment allowances I am quite sure he had no intention of allowing firms to use them for the payment of dividends.
This has become a part of the normal fiscal scene, well known to every good company accountant. This change will make it impossible to do it in the future. All company profits will be treated on the same basis, so that whether they are income or capital gains, they will be taxed. This was one of the reasons why the Capital Gains Tax and the Corporation Tax were introduced this year so as to dovetail together.
I have left myself no time to discuss Capital Gains Tax, but we have had plenty of discussion about it.
The basic principle about it is that it means that people will now be taxed on a basis according to their means and irrespective of the origin of those means, whether it be capital appreciation or income. This is introducing much greater equity into the system than has existed so far. In my view, the comprehensive system that has been introduced makes a great deal of difference to equity.
These reforms have been crying out to be made for many years. The right hon. Member for Barnet toyed with them and put them down. The right hon. and learned Member for Wirral also picked them up and laid them down. Indeed, the party opposite is singularly ill-fitted to deal with reforms of this character because of its composition. One has only to remember—as, I am sure, the Leader of the Opposition will remember clearly—what happened to Mr. Neville Chamberlain when he introduced the National Defence Contribution in 1937, how the Stock Exchange banded together


and called the N.D.C., not National Defence Contribution, but "No Damned Contribution"—and they meant to the Tory Pasty. The Chancellor of the Exchequer of the day, who meanwhile had been promoted to Prime Minister, was forced ignominiously to withdraw Part III of the Finance Bill, 1937, dealing with the National Defence Contribution.
The truth is that we have the old cry. The cry of the parlour reformer throughout the ages has been raised once again. It is never the right time, or it is done in the wrong way. This is always the cry whenever any reform is introduced. I believe that the time was overripe for this. I regret, in some ways, the heat which has been engendered in this matter. To the extent that I am responsible, I am sorry that it is so, because believe strongly that this is a necessary reform for the health of business in this country.
There is nothing anti-business about this. [HON. MEMBERS: "Oh."] Nothing at all. I have said time and time again that this Measure and the general attitude of the Government towards business enterprise is to stimulate and encourage it. [Laughter.] There is no need for anybody on the Opposition benches to titter about this. It is necessary for the health of the economy that we should have a well developed and healthy private sector, not necessarily a predominant sector, but a sector that exists. [Interruption.] Hon. Members opposite should examine how far the nationalised industries

eat into the economy now, in the sense of the proportion of the economy which they constitute, and how far they are part of the national economy. It is on that basis that I am talking about this.

As a result of this Measure, there is no doubt that every citizen, however great or however small, can feel that he is more equitably treated in the matter of taxation in the future than he has been in the past. Business enterprises will feel and will know that they have been encouraged in their enterprise.

Mr. Geoffrey Hirst: This year's joke.

Mr. Callaghan: Manipulation and speculation have been curbed in the Bill. By these reforms, we have opened the way to the more equitable treatment of salary and wage earners throughout the length and breadth of the land. This is an important part of the modernisation of Britain to which the Government have contributed. It is an important part in the achievement not only of modernisation, but also of social equity and justice throughout the country, and also in achieving a dynamic economy. It is for this reason that we intend to carry this Finance Bill through on the very last vote tonight.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 291, Noes 285.

Division No. 258.]
AYES
[10.34 p.m.


Abse, Leo
Bray, Dr. Jeremy
Davies, Harold (Leek)


Albu, Austen
Broughton, Dr. A. D. D.
Davies, Ifor (Gower)


Allaun, Frank (Salford, E.)
Brown, Rt. Hn. George (Belper)
Davies, S. O. (Merthyr)


Alldritt, Walter
Brown, Hugh D. (Glasgow, Provan)
de Freitas, Sir Geoffrey


Allen, Scholefield (Crewe)
Brown, R. W. (Shoreditch &amp; Fbury)
Delargy, Hugh


Atkinson, Norman
Buchan, Norman (Renfrewshire, W.)
Dell, Edmund


Bacon, Miss Alice
Buchanan, Richard
Dempsey, James


Bagier, Gordon A. T.
Butler, Herbert (Hackney, C.)
Diamond, Rt. Hn. John


Barnett, Joel
Butler, Mrs. Joyce (Wood Green)
Dodds, Norman


Baxter, William
Callaghan, Rt. Hn. James
Doig, Peter


Beaney, Alan
Carmichael, Neil
Donnelly, Desmond


Bellenger, Rt. Hn. F. J.
Castle, Rt. Hn. Barbara
Driberg, Tom


Bence, Cyril
Chapman, Donald
Duffy, Dr. A. E. P.


Benn, Rt. Hn. Anthony Wedgwood
Coleman, Donald
Dunn, James A.


Bennett, J. (Glasgow, Bridgeton)
Conlan, Bernard
Dunnett, Jack


Binns, John
Corbet, Mrs. Freda
Edelman, Maurice


Bishop, E. S.
Craddock, George (Bradford, S.)
Edwards, Rt. Hn. Ness (Caerphilly)


Blackburn, F.
Crawshaw, Richard
Edwards, Robert (Bilston)


Blenkinsop, Arthur
Cronin, John
English, Michael


Boston, Terence
Crosland, Rt. Hn. Anthony
Ennals, David


Bottomley, Rt. Hn. Arthur
Crossman, Rt. Hn. R. H. S.
Ensor, David


Bowden, Rt. Hn. H. W. (Leics, S. W.)
Cullen, Mrs. Alice
Evans, Albert (Islington, S. W.)


Boyden, James
Dalyell, Tam
Evans, Ioan (Birmingham, Yardley)


Braddock, Mrs. E. M.
Darling, George
Fernyhough, E.


Bradley, Tom
Davies, G. Elfed (Rhondda, E.)
Finch, Harold (Bedwellty)




Fitch, Alan (Wigan)
Lipton, Marcus
Roberts, Albert (Normanton)


Fletcher, Sir Eric (Islington, E.)
Loughlin, Charles
Roberts, Goronwy (Caernarvon)


Fletcher, Ted (Darlington)
Mabon, Dr. J. Dickson
Robertson, John (Paisley)


Fletcher, Raymond (Ilkeston)
McBride, Neil
Robinson, Rt. Hn. K. (St. Pancras, N.)


Floud, Bernard
McCann, J.
Rodgers, William (Stockton)


Foley, Maurice
MacColl, James
Rose, Paul B.


Foot, Sir Dingle (Ipswich)
MacDermot, Niall
Ross, Rt. Hn. William


Foot, Michael (Ebbw Vale)
McGuire, Michael
Rowland, Christopher


Ford, Ben
Mclnnes, James
Sheldon, Robert


Fraser, Rt. Hn. Tom (Hamilton)
McKay, Mrs. Margaret
Shinwell, Rt. Hn. E.


Galpern, Sir Myer
Mackenzie, Gregor (Rutherglen)
Shore, Peter (Stepney)


Garrett, W. E.
Mackie, John (Enfield, E.)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


George, Lady Megan Lloyd
MacMillan, Malcolm
Short, Mrs. Renée (W'hampton, N. E.)


Ginsburg, David
Mahon, Peter (Preston, S.)
Silkin, John (Deptford)


Gourlay, Harry
Mahon, Simon (Bootle)
Silkin, S. C. (Camberwell, Dulwich)


Greenwood, Rt. Hn. Anthony
Mallalieu, E. L. (Brigg)
Silverman, Julius (Aston)


Gregory, Arnold
Mallalieu, J. P. W. (Huddersfield, E.)
Silverman, Sydney (Nelson)


Grey, Charles
Manuel, Archie
Skeffington, Arthur


Griffiths, David (Rother Valley)
Mapp, Charles
Slater, Mrs. Harriet (Stoke, N.)


Griffiths, Rt. Hn. James (Llanelly)
Marsh, Richard
Slater, Joseph (Sedgefield)


Griffiths, Will (M'chester, Exchange)
Mason, Roy
Small, William


Hale, Leslie
Maxwell, Robert
Snow, Julian


Hamilton, James (Bothwell)
Mayhew, Christopher
Solomons, Henry


Hamilton, William (West Fife)
Mellish, Robert
Soskice, Rt. Hn. Sir Frank


Hamling, William (Woolwich, W.)
Mendelson, J. J.
Spriggs, Leslie


Hannan, William
Mikardo, Ian
Steele, Thomas (Dunbartonshire, W.)


Harper, Joseph
Millan, Bruce
Stonehouse, John


Harrison, Walter (Wakefield)
Miller, Dr. M. S.
Stones, William


Hart, Mrs. Judith
Milne, Edward (Blyth)
Strauss, Rt. Hn. G. R. (Vauxhall)


Hattersley, Roy
Molloy, William
Stross, Sir Barnett (Stoke-on-Trent, C.)


Hayman, F. H.
Monslow, Walter
Swain, Thomas


Hazell, Bert
Morris, Alfred (Wythenshawe)
Swingler, Stephen


Healey, Rt. Hn. Denis
Morris, John (Aberavon)
Symonds, J. B.


Heffer, Eric S.
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Taverne, Dick


Henderson, Rt. Hn. Arthur
Murray, Albert
Taylor, Bernard (Mansfield)


Herbison, Rt. Hn. Margaret
Neal, Harold
Thomas, George (Cardiff, W.)


Hobden, Dennis (Brighton, K'town)
Newens, Stan
Thomas, Iorwerth (Rhondda, W.)


Holman, Percy
Noel-Baker, Francis (Swindon)
Thomson, George (Dundee, E.)


Houghton, Rt. Hn. Douglas
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Thornton, Ernest


Howarth, Harry (Wellingborough)
Norwood, Christopher
Tinn, James


Howarth, Robert L. (Bolton, E.)
Oakes, Gordon
Tomney, Frank


Howell, Denis (Small Heath)
Ogden, Eric
Tuck, Raphael


Howie, W.
O'Malley, Brian
Urwin, T. W.


Hoy, James
Oram, Albert E. (E. Ham, S.)
Varley, Eric G.


Hughes, Cledwyn (Anglesey)
Orbach, Maurice
Wainwright, Edwin


Hughes, Emrys (S, Ayrshire)
Orme, Stanley
Walden, Brian (All Saints)


Hughes, Hector (Aberdeen, N.)
Oswald, Thomas
Walker, Harold (Doncaster)


Hunter, Adam (Dunfermline)
Owen, Will
Wallace, George


Hunter, A. E. (Feltham)
Padley, Walter
Warbey, William


Hynd, H. (Accrington)
Page, Derek (King's Lynn)
Watkins, Tudor


Irvine, A. J. (Edge Hill)
Paget, R. T.
Weitzman, David


Jackson, Colin
Palmer, Arthur
Wells, William (Walsall, N.)


Janner, Sir Barnett
Pannell, Rt. Hn. Charles
White, Mrs. Eirene


Jay, Rt. Hn. Douglas
Pargiter, G. A.
Whitlock, William


Jeger, George (Goole)
Park, Trevor (Derbyshire, S. E.)
Wigg, Rt. Hn. George


Jenkins, Hugh (Putney)
Parker, John
Wilkins, W. A.


Jenkins, Rt. Hn. Roy (Stechford)
Parkin, B. T.
Willey, Rt. Hn. Frederick


Johnson, Carol (Lewisham, S.)
Pavitt, Laurence
Williams, Alan (Swansea, W.)


Johnson, James (K'ston-on-Hull, W.)
Pearson, Arthur (Pontypridd)
Williams, Clifford (Abertillery)


Jones, Dan (Burnley)
Peart, Rt. Hn. Fred
Williams, Mrs. Shirley (Hitchin)


Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Pentland, Norman
Williams, W. T. (Warrington)


Jones, J. Idwal (Wrexham)
Perry, Ernest G.
Willis, George (Edinburgh, E.)


Jones, T. W. (Merioneth)
Prentice, R. E.
Wilson, Rt. Hn. Harold (Huyton)


Kelley, Richard
Price, J. T. (Westhoughton)
Wilson, William (Coventry, S.)


Kenyon, Clifford
Probert, Arthur
Winterbottom, R. E.


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Pursey, cmdr. Harry
Woodburn, Rt. Hn. A.


Kerr, Dr. David (W'worth, Central)
Randall, Harry
Woof, Robert


Lawson, George
Rankin, John
Wyatt, Woodrow


Leadbitter, Ted
Redhead, Edward
Yates, Victor (Ladywood)


Ledger, Ron
Rees, Merlyn
Zilliacus, K.


Lee, Miss Jennie (Cannock)
Reynolds, G. W.



Lever, Harold (Cheetham)
Rhodes, Geoffrey
TELLERS FOR THE AYES:


Lever, L. M. (Ardwick)
Richard, Ivor
Mr. Sydney Irving and




Mr. George Rogers.




NOES


Agnew, Commander Sir Peter
Atkins, Humphrey
Beamish, Col. Sir Tufton


Alison, Michael (Barkston Ash)
Awdry, Daniel
Bell, Ronald


Allan, Robert (Paddington, S.)
Baker, W. H. K.
Bennett, Sir Frederic (Torquay)


Allason, James (Hemel Hempstead)
Balniel, Lord
Berry, Hn. Anthony


Amery, Rt. Hn. Julian
Barber, Rt. Hn. Anthony
Bessell, Peter


Anstruther-Gray, Rt. Hn. Sir W.
Barlow, Sir John
Biffen, John


Astor, John
Batsford, Brian
Biggs-Davison, John







Bingham, R. M.
Gresham Cooke, R.
Monro, Hector


Birch, Rt. Hn. Nigel
Grieve, Percy
More, Jasper


Black, Sir Cyril
Griffiths, Eldon (Bury St. Edmunds)
Morrison, Charles (Devizes)


Blaker, Peter
Griffiths, Peter (Smethwick)
Mott-Radclyffe, Sir Charles


Box, Donald
Gurden, Harold
Munro-Lucas-Tooth, Sir Hugh


Boyd-Carpenter, Rt. Hn. J.
Hall, John (Wycombe)
Murton, Oscar


Boyle, Rt. Hn. Sir Edward
Hall-Davis, A. G. F.
Neave, Airey


Braine, Bernard
Hamilton, Marquess of (Fermanagh)
Nicholson, Sir Godfrey


Brewis, John
Hamilton, M. (Salisbury)
Noble, Rt. Hn. Michael


Brinton, Sir Tatton
Harris, Frederic (Croydon, N. W.)
Nugent, Rt. Hn. Sir Richard


Bromley-Davenport, Lt.-Col. Sir Walter
Harris, Reader (Heston)
Onslow, Cranley


Brooke, Rt. Hn. Henry
Harvey, Sir Arthur Vere (Macclesf'd)
Orr, Capt. L. P. S.


Brown, Sir Edward (Bath)
Harvey, John (Walthamstow, E.)
Orr-Ewing, Sir Ian


Bruce-Gardyne, J.
Harvie Anderson, Miss
Osborn, John (Hallam)


Bryan, Paul
Hastings, Stephen
Osborne, Sir Cyril (Louth)


Buchanan-Smith, Alick
Hawkins, Paul
Page, John (Harrow, W.)


Buck, Antony
Hay, John
Page, R. Graham (Crosby)


Bullus, Sir Eric
Heald, Rt. Hn. Sir Lionel
Pearson, Sir Frank (Clitheroe)


Burden, F. A.
Heath, Rt. Hn. Edward
Peel, John


Butcher, Sir Herbert
Hendry, Forbes
Percival, Ian


Campbell, Gordon
Higgins, Terence L.
Peyton, John


Carlisle, Mark
Hiley, Joseph
Pickthorn, Rt. Hn. Sir Kenneth


Carr, Rt. Hn. Robert
Hill, J. E. B. (S. Norfolk)
Pike, Miss Mervyn


Cary, Sir Robert
Hirst, Geoffrey
Pitt, Dame Edith


Channon, H. P. G.
Hobson, Rt. Hn. Sir John
Pounder, Rafton


Chataway, Christopher
Hogg, Rt. Hn. Quintin
Powell, Rt. Hn. J. Enoch


Chichester-Clark, R.
Hooson, H. E.
Price, David (Eastleigh)


Clark, William (Nottingham, S.)
Hopkins, Alan
Prior, J. M. L.


Clarke, Brig. Terence (Portsmth, W.)
Hordern, Peter
Pym, Francis


Cole, Norman
Hornby, Richard
Quennell, Miss J. M.


Cooke, Robert
Hornsby-Smith, Rt. Hn. Dame P.
Ramsden, Rt. Hn. James


Cooper, A. E.
Howard, Hn. G. R. (St. Ives)
Rawlinson, Rt. Hn. Sir Peter


Cooper-Key, Sir Neill
Howe, Geoffrey (Bebington)
Redmayne, Rt. Hn. Sir Martin


Cordle, John
Hunt, John (Bromley)
Rees-Davies, W. R.


Corfield, F. V.
Hutchison, Michael Clark
Renton, Rt. Hn. Sir David


Costain, A. P.
Iremonger, T. L.
Ridley, Hn. Nicholas


Courtney, Cdr. Anthony
Irvine, Bryant Godman (Rye)
Ridsdale, Julian


Craddock, Sir Beresford (Spelthorne)
Jenkin, Patrick (Woodford)
Roberts, Sir Peter (Heeley)


Crawley, Aidan
Johnson Smith, G. (East Grinstead)
Rodgers, Sir John (Sevenoaks)




Roots, William


Crosthwaite-Eyre, Col. Sir Oliver
Jones, Arthur (Northants, S.)
Royle, Anthony


Crowder, F. P.
Jopling, Michael
Russell, Sir Ronald


Cunningham, Sir Knox
Joseph, Rt. Hn. Sir Keith
St. John-Stevas, Norman


Curran, Charles
Kaberry, Sir Donald
Sandys, Rt. Hn. D.


Currie, G. B. H.
Kerr, Sir Hamilton (Cambridge)
Scott-Hopkins, James


Dalkeith, Earl of
Kershaw, Anthony
Sharples, Richard


Dance, James
Kilfedder, James A.
Shepherd, William


Davies, Dr. Wyndham (Perry Barr)
Kimball, Marcus
Sinclair, Sir George


d'Avigdor-Goldsmid, Sir Henry
King, Evelyn (Dorset, S.)
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Dean, Paul
Kirk, Peter
Smyth, Rt. Hn. Brig. Sir John


Deedes, Rt. Hn. W. F.
Kitson, Timothy
Soames, Rt. Hn. Christopher


Digby, Simon Wingfield
Lagden, Godfrey
Spearman, Sir Alexander


Dodds-Parker, Douglas
Lambton, Viscount
Speir, Sir Rupert


Doughty, Charles
Lancaster, Col. C. G.
Stainton, Keith


Douglas-Home, Rt, Hn. Sir Alec
Langford-Holt, Sir John
Stanley, Hn. Richard


Drayson, G. B.
Legge-Bourke, Sir Harry
Steel, David (Roxburgh)


du Cann, Rt. Hn. Edward
Lewis, Kenneth (Rutland)
Stodart, Anthony


Eden, Sir John
Litchfield, Capt. John
Stoddart-Scott, Col. Sir Malcolm


Elliot, Capt. Walter (Carshalton)
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Studholme, Sir Henry


Elliott, R. W. (N'c'tle-upon-Tyne, N.]
Lloyd, Ian (P'tsm'th, Langstone)
Summers, Sir Spencer


Emery, Peter
Lloyd, Rt. Hn. Selwyn (Wirral)
Talbot, John E.


Errington, Sir Eric
Longbottom, Charles
Taylor, Sir Charles (Eastbourne)


Farr, John
Longden, Gilbert
Taylor, Edward M. (G'gow, Cathcart)


Fell, Anthony
Loveys, Walter H.
Teeling, Sir William


Fisher, Nigel
Lubbock, Eric
Temple, John M.


Fletcher-Cooke, Charles (Darwen)
Lucas, Sir Jocelyn
Thatcher, Mrs. Margaret


Fletcher-Cooke, Sir John (S'pton)
McAdden, Sir Stephen
Thomas, Sir Leslie (Canterbury)


Foster, Sir John
Maclean, Sir Fitzroy
Thompson, Sir Richard (Croydon, S.)


Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Macleod, Rt. Hn. Iain
Thorneycroft, Rt. Hn. Peter


Fraser, Ian (Plymouth, Sutton)
McMaster, Stanley
Thorpe, Jeremy


Galbraith, Hn. T. G. D.
McNair-Wilson, Patrick
Tiley, Arthur (Bradford, W.)


Gammans, Lady
Maginnis, John E.
Tilney, John (Wavertree)


Gardner, Edward
Maitland, Sir John
Turton, Rt. Hn. R. H.


Gibson-Watt, David
Marples, Rt. Hn. Ernest
Tweedsmuir, Lady


Giles, Rear-Admiral Morgan
Marten, Neil
van Straubenzee, W. R.


Gilmour, Ian (Norfolk, Central)
Mathew, Robert
Vaughan-Morgan, Rt. Hn. Sir John


Gilmour, Sir John (East Fife)
Maude, Angus
Vickers, Dame Joan


Glover, Sir Douglas
Mawby, Ray
Walder, David (High Peak)


Glyn, Sir Richard
Maxwell-Hyslop, R. J.
Walker, Peter (Worcester)


Godber, Rt. Hn. J. B.
Maydon, Lt.-Cmdr. S. L. C.
Walker-Smith, Rt. Hn. Sir Derek


Goodhart, Philip
Meyer, Sir Anthony
Wall, Patrick


Goodhew, Victor
Mills, Peter (Torrington)
Walters, Dennis


Gower, Raymond
Mills, Stratum (Belfast, N.)
Ward, Dame Irene


Grant, Anthony
Miscampbell, Norman
Weatherill, Bernard


Grant-Ferris, R.
Mitchell, David
Wells, John (Maidstone)







Whitelaw, William
Wood, Rt. Hn. Richard
Younger, Hn. George


Williams, Sir Rolf Dudley (Exeter)
Woodhouse, Hn. Christopher



Wills, Sir Gerald (Bridgwater)
Woodnutt, Mark
TELLERS FOR THE NOES:


Wise, A. R.
Wylie, N. R.
Mr. McLaren and Mr. MacArthur.


Wolrige-Gordon, Patrick
Yates, William (The Wrekin)

Bill accordingly read the Third time and passed.

Orders of the Day — CONTROL OF OFFICE AND INDUSTRIAL DEVELOPMENT BILL

Lords Amendments considered.

Clause 2.—(EXEMPTION BY REFERENCE TO OFFICE FLOOR SPACE.)

Lords Amendment No. 1: In page 4, line 18, after "3,000" insert:
but not less than 1,000".

Read a Second time.

10.50 p.m.

Mr. Peter Emery: I am rather surprised that on this Amendment we have not had something from the Government about—

Mr. Deputy-Speaker (Dr. Horace King): Order. It is impossible at this stage for the Government to accede to the hon. Gentleman's request. The hon. Gentleman must first move his Amendment to the Amendment.

Mr. Emery: I am sorry, Mr. Deputy-Speaker.
I beg to move, as an Amendment to the Lords Amendment, to leave out "1,000" and add "2,500".
I was rather surprised to find that the Bill had come back from consideration in another place with a new principle introduced by the Government. During the Committee and Report stages in this House, we had obtained no consideration, only a complete generalisation on the bottom limit which might be applied to both I.D.C.s and O.D.P.s.
So that hon. Members may be quite clear about it, our Amendment deals particularly with the exemption of any development in which the office floor space to be created, together with the office floor space in any related development, would be below a limit of 3,000 sq. ft. It was made quite clear in Committee that the Government wished to take powers to ensure that they had the facilities to come below this level if it was considered necessary by them.
What the Lords Amendment does is to stipulate this level at 1,000 sq. ft., and what our Amendment attempts to do is to make certain that there shall be a

level not as low as 1,000 sq. ft. but of 2,500 sq. ft.
It is highly sensible that any industry or office that has to be expanded should have the right to know that the level can be somewhat greater than the present suggestion. The House might like to know that it would amount to an extension of about 4½ times the size of the Clerk's Table. It is nonsense for the Government to allow by right an extension of that size only, even in the most overcrowded areas of the country. We therefore hope by the Amendment to ensure that industry will know definitely that the level will not be below 2,500 sq. ft.
We shall be moving an Amendment to deal with the industrial side later on, and therefore I deal for the moment only with office use. Bearing in mind the provisions of the Offices, Shops and Railway Premises Act, the extension of an office by only 1,000 sq. ft. means that one can provide working space for an extra 15 or, perhaps, 20 people.
This is no proper extension. Surely the President of the Board of Trade will realise that if he holds to a minimum level as low as this his Department will be inundated with applications for office development permits and will be unable to refuse any application for a permit that is made. The Government will never get a firm to move its office to a less crowded area than London if it wishes to expand by only 10, 15 or 20 persons. It would not be sense for any business with an office staff of 200, 100 or even 50 to move out of a crowded area merely so that it could extend by another 30 or 40 people.
This makes good common sense. It has nothing to do with the desire of both sides of the House to ensure that more office jobs and more office accommodation are provided outside the conurbations. We are all united in that desire. But what we do not wish to do in achieving that is to have regulations which mean that offices will have to be kept sterile or moribund in any form of expansion. So we believe that it makes sense to have the figure of 2,500 sq. ft. for offices. We have chosen that figure because we have tried to tie it up with our later Amendment to deal with the industrial side. It seemed to us to make sense that there should be consistency about the bottom


level for both the office development permit and the industrial development certificate.
I must press my point that if every firm in an office which would be controlled by the Bill runs the risk of having the Board of Trade lower the limit to 1,000 sq. ft., it can do nothing but ensure that many businesses will cease to expand. Whether the Government like it or not, office work has to be carried on for every form of business enterprise. Because of its integral part in business activity, we believe that every firm in the country has the right to know that at least a modicum of expansion can be carried out in its present premises, if it can get planning permission and meet all the other requirements of local authorities.
11.0 p.m.
It is purely because of that that I and my hon. Friends thought it right and proper that this Amendment should be put down. I hope that the Government will accept the principle that a minimum should be placed in the Bill. Indeed, we are concerned that the minimum is as low as we find it.
Although I accept that the Amendment was moved by some of our noble Friends in another place, I was surprised that the principle was accepted by the Government. Now that the principle has been accepted for goodness sake let us make some sense of it by having the figure at a level which businesses and offices can understand and with which they will be able to deal.

The President of the Board of Trade (Mr. Douglas Jay): The Government have decided on this issue to accept the substance of the Amendment moved by the Opposition in another place. When the Bill left this House we had set a figure at which O.D.P.s would be required of 3,000 sq ft., with permission for the Board of Trade to go either below or above that figure in a particular area at any time it wished. The Opposition in another place moved an Amendment to allow the Board to go below that figure but that it should not be permissible to go below 1,000 sq. ft. This was regarded as a reasonable minimum. We have decided both in the case of O.D.P.s and I.D.C.s to accept that proposition put forward by the Conservative Opposition.
I think that it is a little odd for the hon. Member for Reading (Mr. Peter Emery) to describe the proposition as nonsense as his noble Friends put it forward and voted in favour of it.

Mr. Peter Emery: Of course it would not pass the comprehension of the President of the Board of Trade that the original Amendment put forward in another place was for a level of 2,000 sq. ft. and the Amendment which was accepted was for a level below that figure. I thought that I made it plain that a principle which we have been unable to get accepted in this House was therefore accepted and I congratulate my noble Friends. Now we should make more sense of the size.

Mr. Jay: Nevertheless, the proposal to make it 1,000 sq. ft. was made by the hon. Gentleman's noble Friends, and I should have thought that he would have felt some satisfaction and gratitude that we had accepted it. There is no need to go below 1,000 sq. ft. for O.D.P.s or for I.D.C.s. We then reach a state of de minimis non curat lex.
Now the hon. Member wishes to put the figure back to 2,500 sq. ft. for both O.D.P.s and I.D.C.s. I take it that I am in order, because the argument refers to I.D.C.s as well as to O.D.P.s. We do not feel that we can go as far as that. It is surprising that when we have gone as far as we have to meet the Opposition they should not be satisfied. We started with 2,500 sq. ft. as meaning the net area and we then accepted an Amendment to make it 3,000 sq. ft. gross. That, of course, contained a certain amount of latitude for those proposing extensions.
We have now gone a good deal further and agreed to make 1,000 sq. ft. the minimum. If we were to go to 2,500 sq. ft. for both offices and factories it would then be possible to put up a building with 2,500 sq. ft for one and 2,500 sq. ft. for the other, and experience in recent years has shown that a series of small buildings of this kind can be erected. Minor trading estates in the South-East based on this principle have been erected and we have no doubt, on the basis of that experience, that to increase the minimum to 2,500 sq. ft. would constitute a considerable loophole in the control.
Therefore, I think that we have gone a long way to meet the Opposition both here and in another place and I regret for the reasons I have given, that we do not feel that it is possible to go further.

Captain Walter Elliot: I hope that the right hon. Gentleman will reconsider. The Bill will otherwise lead to decisions being made by firms not based on economic grounds from their point of view. We sympathise with the objective of the Bill, which is to get people out of London, but nevertheless it will lead to firms taking decisions not based entirely on economic judgment.
I am better acquainted with London than with other conurbations and I believe that extensions of the size we propose would not be, as a general rule, for the purpose of accommodating extra office staff. It may be that a firm will want to accommodate drawing boards or other equipment and I do not believe that allowing a space four times the size of the Clerk's Table to a firm would mean a lot more office staff.
The objective of the Bill is to curb office jobs but it is drawn in such a way that it will operate very rigidly. I am sure that the right hon. Gentleman will agree that he could not conceivably succeed in stopping increases in office jobs entirely and if he did it would have very undesirable effects.
My hon. Friend the Member for Reading (Mr. Peter Emery) pointed out the position of small, growing companies. It is probably true that some companies starting up probably will never grow except in the London area and permission to use an extra space four times the size of the Table, utilising a site which otherwise would not be economically utilised, might be just enough to get them off the ground to growth and prosperity. Then would be the time to get them to move away and when they could possibly afford to move.
I hope that the right hon. Gentleman will reconsider this in relation to the rigidity of the Bill and how it is to help just those small firms starting off—firms which are so important now and will be more so in the future.

Mr. H. P. G. Channon: I am very disappointed with the attitude of the President of the Board

of Trade so far in respect of this Amendment to the proposed Lords Amendment. I welcome the fact that the Government have decided to make a concession in this matter. I also welcome the concession itself, although I support my hon. Friend the Member for Reading (Mr. Peter Emery) in the view that they have not gone as far as they should have. It is true that in response to a plea by Lord Drumalbyn the Government made this concession in another place. It was a curious and short debate, and very few reasons were given for the concession.
I have no idea what the history of the matter was, although I recall—somewhat dimly after this passage of time—a rather lengthy debate in Committee on 11th March on the question whether or not the President of the Board of Trade should take powers to reduce the figure of 2,500 sq. ft. as it then was, in certain areas. At that time we argued as strongly as we could that it was very difficult to see under what circumstances it would be necessary for the Board of Trade to reduce this figure. It was then quite impossible to persuade the right hon. Gentleman to remove this low limit, or change it at all. He had the power to reduce it to one sq. ft. if that was his wish.
If we accept the Lords Amendment the Bill will provide that the area should not be less than 1,000 sq. ft., but in our discussion of the Bill we must remember two things. First, the Bill will last for many years without being reviewed by this House. I thing that it will last for seven years. I cannot pretend to be as familiar with the Bill's provisions as I was a few months ago, but that is what I recall.

Mr. Peter Emery: It is a temporary Bill.

Mr. Channon: Yes—and "temporary" in the terms of the Board of Trade is a difficult thing to define—like the surcharge. The second thing that we have to remember is that the Government are taking powers to regulate the control of office building not only in the London area—and many people would think that that was a proper thing to do—but in any area of the country as they think fit. All they need to do is to make an order designating a certain region as coming within the control of the Bill. Curious


though it may seem, I still think that after all the long months of debate on this matter the general public have not realised what wide powers the Government are taking here.
It is arguable that the Government should have these powers, but if they are to have them we should make them as realistic as possible. I seriously ask the President of the Board of Trade whether he is resting his case on the ground that there are possible circumstances, in some area of the country in which it will be necessary for him or his successor to say that an exemption limit of more than 1,000 sq. ft. would lead to abuse. He or the Minister of State should tell us what those circumstances are. I would think it extremely unlikely that if we increased the exemption limit from 1,000 sq. ft. to 2,500 sq. ft. we should weaken the provisions of the Bill.
11.15 p.m.
I have always been of the opinion that the whole area covered by the Bill, as originally applied, was highly unsatisfactory, highly anomalous, and full of difficulties. To some extent the right hon. Gentleman has recognised that there are many anomalies as to the area with which the Bill will deal. I seem to remember also that during the Committee stage of the Bill we had some sort of assurance from the President, or it may have been the Parliamentary Secretary to the Ministry of Housing and Local Government, because on that occasion so obvious was the strength of the Opposition's case that the Minister of State lost his voice and was not able to reply to us. So we had the pleasure of listening to the Parliamentary Secretary, and I seem to recall that we had some sort of assurance that this provision would be applied flexibly and that we should not have an unreasonable lower limit in a particular area.
Naturally none of us expects that the Board of Trade is going to be unreasonable in applying a lower limit, but it does seem to me that it is not giving anything away if it makes the minimum figure 2,500 sq. ft. rather than the 1,000 sq. ft. which is now written into the Bill. I am grateful for the 1,000 sq. ft., but I do not think that it goes far enough.
At one time there was some dispute as to how many sq. ft. it was necessary

to have per office worker in the near future. I think the President of the Board of Trade is on record as saying that one should have about 150 sq. ft. per office worker. I have not got the reference, but I think that he said that during the Second Reading debate.

Mr. Jay: I do not think that I laid that down as what one ought to have. That was the basis of a calculation on a figure I had just been given.

Mr. Channon: I am sorry if I went too far, but I do not think that destroys my case. I think the right hon. Gentleman is saying that that is a reasonable figure to have per office worker, and that that is the basis on which his calculation has been made.
On that basis, 1,000 sq. ft. provides space for six or seven office workers before one has to get an O.D.P. If one goes up to 2,500 sq. ft. as the lower limit one is making it about 14. I do not think that the President of the Board of Trade would be doing anything to destroy the effective provision of this Bill if he accepted that.

Mr. John Hall: I am sure my hon. Friend will realise that in dealing with this he is really talking about gross footage, and that the smaller the area one is allowed the less net footage one will get. Therefore, one would not have space for the number of office workers which he was calculating.

Mr. Channon: I must confess that I am not an expert on exactly what physical effect the difference between gross and net will have. We had a long discussion about gross and net, and if I recall we were offered 2,500 sq. ft. net and we have now got 3,000 sq. ft. gross. The President of the Board of Trade is, I think, under the impression that that makes very little difference. I cannot pretend to be an expert on gross and net as applied to this Bill, and I hope that my hon. Friend will enlighten us.
I think that the President of the Board of Trade has gone on record as saying there shall be 150 sq. ft. per office worker, and all I am saying that if he were to extend this limit to 2,500 sq. ft. I do not think he would be giving much away. I think he is going to allow it to be that area anyway. Whether it is the London area or any other area he has in mind,


I do not think it is going to make any difference. Surely his intention is at the moment that the exemption limit should be 2,500 sq. ft. I am not asking him to reduce or weaken this Bill. He will be giving very little away, he will save himself a great deal of administrative work, I do not think he will weaken the provisions of the Bill, and he will go a long way towards satisfying those who think that the Bill is too tightly and inflexibly drawn.
There was a very short debate in another place. I wish it had been longer because I like to know why this figure of 1,000 sq. ft. was chosen. I am still firmly convinced that 2,500 sq. ft. is the right figure. It is difficult to see why the President of the Board of Trade would like to lower it. If he has cases in mind perhaps he will let us know. Neither on Report, in Committee nor at this stage of the Bill, has he given us an example of the sort of extensions in which he is likely, genuinely, to need a figure lower than 2,500 sq. ft. At the moment he is taking 3,000 sq. ft. for the London area. Does he think that in the London area, or some regions of the country, the situation is likely to get so acute during the next seven-year period that he will have, to avoid difficulties, to reduce the figure to 1,000 sq. ft.? If that is his case he can tell us and we can, perhaps, accept it. I think that in this, as in so many other Bills introduced by all Governments, a figure is put in, in order to protect civil servants in case of wholly unlikely circumstances taking place, when they would have to take wholly unlikely measures.
The Ministers who have to justify their case to this House ought to point out what is likely to happen in the future; what is the probable result of what they wish to achieve and whether that will give them the extra powers they are seeking. I ask the President of the Board of Trade to make a small addition to the modest concession which was made in another place. I hope that he will not have a closed mind and will be prepared to accept our Amendment.

Mr. A. R. Wise: I agree with my hon. Friend the Member for Reading (Mr. Peter Emery) that we are in sympathy with any effort to reduce office building in London, and to persuade people to move their offices outside this

particular conurbation. Anyone who has the pleasure of watching the abundantly good relations which now exist between the management, employees and passengers in one of the major sections of our communications will realise that this is becoming necessary. It is being done without the Government doing anything at all because soon no one will be able to get into London at all.
The Government were moderately forthcoming when they drafted their Bill, but what I cannot see is why the right hon. Gentleman thinks that this concession is a concession at all. I cannot agree with him that we must assume, merely because certain persons in another place happen to share the same political views as ourselves, on broad principles, that they are invariably right on all questions of detail. That is a doctrine that I think can be applied only by those who enjoy the full principles of Socialism. We might just as well leave the Bill unamended.
Before amendment the Bill said that the prescribed exemption limit should be 3,000 sq. ft. In the next subsection it said that the Board of Trade could make a nonsense of that whenever it felt like it, and there need be no prescribed exemption limit. This extra thousand sq. ft. is very little. It is enough to put one lavatory on the end of an office, with washing facilities, but it is of no practical value to anybody who is trying to make a modest extension to an office, which may be very necessary.
Presumably the object of this limit was to prevent the President of the Board of Trade being swamped by thousands of applications for these very small alterations. We were told during the Committee stage that the Board of Trade already had a waiting list of applicants for office development which was the size of the Encyclopaedia Britannica. I assume that the object of the course was to reduce the number of applications which would have to be considered by the Board. In my view this 1,000 sq. ft. will not reduce it at all. It should be said firmly by the Minister that while this Government are in power there will be no extension of any office premises at all.
I hope that during this last debate on this Bill we shall hear something from some supporters of the Government other


than Ministers. We sat in Committee looking day after day at what became known to us as "the Silent Six"—

Mr. Speaker: Order. Debate on Lords Amendments and Amendments to Lords Amendments is very tight. However nice it may be to look at these persons, it does not arise on this question.

Mr. Wise: I accept your Ruling, Mr. Speaker. But I hope that at least one of them will utter something in the course of this debate and that we may hear more from them in support of their Government than pathetic silence.

Mr. Stephen Hastings: I intervene with some diffidence, and very briefly, since I was not on the Standing Committee. I have been impressed with the reasonableness of my hon. Friend's arguments in moving this Amendment and with one particular point that my hon. and gallant Friend the Member for Carshalton (Captain Elliot) made. He mentioned that there are a large number of small firms in the City of London whose businesses would be virtually impossible, or at least half as effective, if they were required to move out arbitrarily. Here, I suppose, I ought to declare an interest since I belong to a firm definitely in this category. It is not, however, a firm that is thinking of enlarging its offices and therefore that case is not applicable to this Bill. But, where there is one firm of this type, there will be many others to which the Bill will apply.
I would ask the President of the Board of Trade to recognise that this is a serious argument and, for instance, firms such as those I have mentioned could not carry on if they had to remove their offices in the City away from easy access by customers, manufacturers from the north of England, possible importers from abroad, who could all meet in the heart of London. It would be no acceptable invitation to them to say that if they wished to expand they must go off to Harrow, or beyond into the suburbs, or to some town on the outskirts of London, and carry on their business. It would not make sense. This is part and parcel of having the City of London.
I think that the Amendment is really most reasonable. An increase of an

office from the size of the Clerk's Table to four times the size of the Table is not adequate. It is perhaps the difference between having one secretary or having an extra executive with the two extra secretaries to go with him. One extra secretary is a virtually meaningless expansion, but if a firm such as the one which I have in mind—[Laughter.]—I see no reason why I should be causing this ribaldry on the Treasury Bench. A meaningful expansion of a firm of this kind would always be another executive. This means, not one person, but two at least, if not more. To expect that addition to be squashed into something the size of the Table and to work effectively is nonsense.
11.30 p.m.
If my premise is accepted that to function effectively firms of this kind must operate in the City of London, expansion must be at least of the magnitude suggested in our Amendment and not squashed into 1,000 sq. ft. For this reason alone, I ask the President of the Board of Trade to think again. I cannot see why, this small concession having been made, it should not be translated into a practical concession instead of a figure which is virtually meaningless. I hope that we shall hear further from the right hon. Gentleman and that even at this stage he will see fit to agree with us.

Sir Richard Thompson: I intervene only briefly, my reason being that I have heard practically every word that has been spoken on the Bill, having been a member of the Standing Committee which considered it. I accept that the President of the Board of Trade has made some gestures—rather faint ones in my view—towards alleviating the position. There was the small Amendment in Committee upstairs. As the right hon. Gentleman has rightly pointed out, we have had another little inch forward in another place. For that we are grateful.
Having listened to the right hon. Gentleman's speech, however, I wonder what is his real objection to accepting our Amendment. I understood the right hon. Gentleman to say—and perhaps his hon. Friend the Minister of State will spell it out for us in a little more detail when he replies—that if a lower exemption of 2,500 sq. ft. gross, not net, were written


into the Bill, there would be a distinct chance of being faced with a regular chain of small developments just inside the exemption limit which, taken in the aggregate, would have the effect of setting the Bill's purpose at nought.
If I am right in that, I wish that the right hon Gentleman would work that one out a little bit more for us, because that kind of fear seems to me to be quite unnecessary. A development of that kind, if it occurred at all, would surely be grossly uneconomic. I cannot imagine that anybody would exercise his ingenuity simply to try to circumvent the Bill. It would be a costly and futile way of trying to do it. That appeared to be the only point on which the right hon. Gentleman hung his rejection of our Amendment.
As I said in Committee, the President of the Board of Trade need not be quite so meticulous in this matter. The real deterrents on office building are not mainly in the Bill. They are in the economic climate which is developing within the country by means of the credit squeeze and the high Bank Rate. As time goes on, the right hon. Gentleman will find that these powerful deterrents do a great deal of the work of the Bill for him. That, however, is another argument.
The right hon. Gentleman finished his opening remarks with the old Latin tag de minimis non carat lex. I wonder whether we cannot turn that against him. The difference between what we are proposing as a lower limit and the figure which the right hon. Gentleman wishes to keep in the Bill is a matter of 1,500 sq. ft. gross.
I think that it is a very small difference. I also think that the administrative convenience of the right hon. Gentleman's Department, and also that of people seeking to make small additions to their office premises, would be served by choosing the higher rather than the lower figure. I therefore urge the right hon. Gentleman to make a treble of this. He gave us a crumb in Committee upstairs. We had another little bite in another place. This evening he has his Finance Bill. Why does not he make a job of it and agree to our Amendment?

Mr. John Hall: The right hon. Gentleman, with his long experience of this Bill in Committee upstairs, and indeed on

Report, will not be surprised to hear me say that his first reply was disappointing. I say "disappointing", because it was not the reply that we expected from him. However, I am fairly confident that, having listened to the powerful arguments which have been advanced by my hon. Friends, whoever winds up the debate will give us a more encouraging reply.
I think that the right hon. Gentleman was a little mistaken, or perhaps he misheard what my hon. Friend the Member for Reading (Mr. Peter Emery) said when moving the Amendment. He gave the impression that he thought we were in some way criticising the noble Lords in another place for moving this Amendment and indeed getting a small concession. My hon. Friend was doing nothing of the kind. He was paying tribute to the fact that the noble Lords had succeeded in doing in another place what we had not succeeded in doing here. They at least breached the principle on which the Government had taken a firm stand, namely, that they would not state that there should be a minimum below which it was not necessary to be given exemption, and what was done in another place was a step in the right direction.
We were a little surprised and sorry that the noble Lords were not able to extract a rather more worthwhile concession from the Government, and it is a little hard to discover why, because the debate was very short. It occupied less than three-quarters of a column of the OFFICIAL REPORT, and indeed the reply of the noble Lord who spoke on behalf of the Government was so brief that it was obvious that he was anxious to accept the Amendment before an attempt was made to move another one asking for a little more.
We are asking for a little more. In fact, we are asking the Government to be realistic about this. The right hon. Gentleman will remember that we debated this at great length in Committee upstairs. We were trying to get the Government to accept an Amendment which would have fixed the figure at 2,500 sq. ft., which was the figure put into the Bill by the Government, though this was later increased to a gross figure of 3,000 sq. ft. We were seeking to make the then exemption limit the minimum or base figure which could not be reduced. That seemed to us then, and it seems to us now, to be the sensible way of approaching this problem.
Perhaps I might read part of the argument that I advanced in Committee upstairs. I said:
We have already heard that the present figure of 2,500 sq. ft. is calculated on the basis that it will provide accommodation for about 20 to 25 office workers.
This was on the basis of 150 sq. ft. per worker, which was the basis of the right hon. Gentleman's calculation.
If that were cut very drastically—to half or below—the concession which would be given would be a very small one and would, in effect, bring to a stop all office building in the area concerned. I am sure that this is not the intention. I am sure that this has been put in as one of those drafting points which one puts into a Bill to provide flexibility in the legislation so that the Government can change their minds at some time or another and vary the amount of floor space. In this case, however, it is almost inconceivable that the amount now allowed would be still further reduced. It might be stopped altogether, but this is another matter. We would all regret that very much, but in some ways it would be more logical. But to reduce the amount drastically below the present level makes the present concession valueless and makes it difficult for people to plan ahead."—[OFFICIAL REPORT, Standing Committee D, 9th March, 1965; c. 397–8.]
For any normal development, 2,500 sq. ft. is about the minimum one could expect. Anything below that is almost not worth thinking about.

Mr. Channon: The number of 20 or 25 workers would be much lower than the 150 sq. ft. provision; there could be only about 16.

Mr. Hall: That reinforces the point I am making. It is extremely difficult to understand why the Board of Trade, in what is now subsection (7) of Clause 2 and was originally subsection (6), should take power to vary the 3,000 sq. ft., even though it has accepted this minor Amendment providing a minimum of 1,000 sq. ft. below which the Board will not go. It would be sensible to be reasonable and logical and to accept that anything below 2,500 sq. ft. is not worth considering. I am certain that the Board has not in mind at the moment introducing a figure below 3,000 sq. ft. gross. This curious trait of wanting to play absolutely safe in case an extraordinary situation should arise to make it necessary to reduce would bring a development to a halt. The lower limit is neither logical nor reasonable.
It is a little early in the evening to divide the House. We do not want to do so on this comparatively minor issue, the logic of which, I am sure, is apparent to all hon. Members opposite. I am prepared to sit down and to give an opportunity to the President of the Board of Trade to say that he accepts the logic of our proposal. Then we can proceed to consider the next Amendment. I have heard no logical or sound argument why the Board should have this power.

Mr. Jay: I speak again with the leave of the House—indeed, at the invitation of hon. Members opposite to reply. I deplore the comments of hon. Members opposite about the wisdom of those in another place and also the suggestion that no concession is involved. Of course this is a concession. If there were no such minimum, it would be within the power of the Board of Trade to accept a figure of below 1,000 sq. ft.
The hon. Member for Mid-Bedfordshire (Mr. Hastings) expressed fears about firms in the City of London and elsewhere which perhaps would not be able to put in hand useful and valuable extensions if this control were too rigidly applied. I remind the House that even if at any time the Board were to lower the minimum below 2,500 sq. ft., which we have no intention of doing at present, it is still perfectly open to grant permission to firms in such cases where a good, convincing case is made.
The hon. Member for Southend, West (Mr. Channon), who has the distinction of representing an area within the Metropolitan region as defined by the Bill, asked what reason there was to think that it would ever be necessary to go below 2,500 sq. ft. The answer is quite plain. This has proved necessary in the case of I.D.C.s. In that case the minimum for a great many years was 5,000 sq. ft. Incontrovertible evidence has accumulated in recent years that that had led to evasion and, as a result, we had to decide to lower it in certain congested areas to 1,000 sq. ft.
It does not necessarily follow, because this has happened in the case of factories, that it will immediately follow in the case of offices. Therefore, I think we are sensible in starting with 3,000 sq. ft. It would be imprudent to assume that even though it has happened in the case of


factories, it is only a remote possibility that it might happen also in the case of offices. That is really the answer to the hon. Gentleman.
11.45 p.m.
In those circumstances, I think we are merely showing reasonable prudence and foresight in taking the power to go down at least as far as 1,000 sq. ft., although, as I say, we have no present intention in the case of O.D.P.s of doing so.

Question, That "1,000" stand part of the Lords Amendment, put and agreed to.

Lords Amendment agreed to.

Clause 3.—(RETROSPECTIVE CONTROL IN METROPOLITAN REGION.)

Lords Amendment No. 2: In page 4, line 41, leave out "for" and insert "consisting of or including".

The Minister of State, Board of Trade (Mr. George Darling): I beg to move, That this House doth agree with the Lords in the said Amendment.
With your permission, Mr. Speaker, I think it would be convenient to consider at the same time Lords Amendment No. 14, Schedule 1, in page 26, line 7, leave out second "of".

Mr. Speaker: Yes.

Mr. Darling: These are purely drafting Amendments designed to correct a slight discrepancy in the description of what are two closely allied provisions in the Bill. The first one is subsection (2) of Clause 3 which provides for the retrospective control of office development in Greater London. The second one is paragraph 1 of Schedule 1 which provides grounds of appeal against enforcement notices under Clause 9. In each of these cases the intention is to apply the retrospective control in Greater London to development which either consists of or includes the erection of the building containing office premises or consists of or includes the extension of a building by the addition of office premises.
The two Amendments bring the drafting of both precisely into line with this intention. Neither of the Amendments makes any change of substance in the provisions of the Bill, and the Amendments were proposed by the Government on Third Reading in another place on the

advice of Parliamentary counsel, so that the two provisions in the Bill shall be worded and shall operate in precisely the same way.

Mr. John Hall: I confess that I find it a little difficult to understand precisely the reason for these Amendments. I know that in the other place it was said that they were drafting Amendments, and that they went through without any discussion at all. What I am not sure about is whether the first Amendment has any effect on the operation of the Clause. There seems to be an impression in some quarters that without the Amendment the Clause has a slightly different effect. Can the hon. Gentleman assure us that there is no change at all in the operation of this Clause or of the Schedule if these Amendments are agreed to?

Mr. Darling: There is no alteration in what was always considered to be the intention of the Clause, which is perfectly clear. If I might repeat it, it was not altogether clear whether we were carrying out the intention that was expressed in the Bill, which was that where there is retrospective control, the development that we were concerned with for the retrospective control either consisted of the erection of a building containing office premises, or the extension of a building with the addition of office premises.
If the hon. Gentleman the Member for Wycombe (Mr. John Hall) remembers, throughout the course of discussions in Committee upstairs, we were talking about new office buildings and the extension of office buildings as being equally brought within the control of the Bill. There was no dubiety about the intention there: whether it was a new building or an extension to an office building, if the development was above a certain size it was brought within the scope of the Bill.
Neither Amendment makes any change of substance in the provisions of the Bill. They just make it perfectly clear that we are covering both points.

Mr. Peter Emery: It has been suggested that this is a drafting Amendment, but it is not good enough to say that it is a drafting Amendment when it alters the operation of the Bill as it is at the moment. The Government are altering the Bill to what they thought it


ought to have been, and that is not drafting. It is an alteration in the Bill.
I am sorry to press this, but it is particularly important, because it deals with a matter retrospectively. It is proposed that we should now alter a provision by which a firm of builders or contractors may have believed they were not affected. At this late stage, it is being said to them, "Oh. but you are affected retrospectively".
It is proposed that in the phrase in line 41:
or for the extension of a building on land in Greater London
there should be inserted the words:
consisting of or including".
Does it mean that there may have been a building or an extension in progress before the Amendment, when retrospection would not have been possible, to which, because of the Amendment, retrospection will now be applicable? If that is so, then the Government have no right to do it.
However, if the Minister of State can assure me that there is no class of developer who would not previously have been affected by the retrospective provisions and who will not be as a result of the alteration, then we will not feel so strongly. But it is important that we should have the assurance so that a provision extending the retrospective powers of the Bill is not passed as a drafting Amendment.

Mr. Darling: I can give the hon. Member that assurance right away. If he follows closely the wording in subsection (2) he will see that at the moment it reads:
Where before the passing of this Act an application was made to the local planning authority for planning permission for development consisting of or including the erection on land in Greater London of a building containing office premises, or for the extension of a building on land in Greater London by the addition of office premises.
All that we are doing is to bring the wording in line with the Schedule by omitting "for" and putting in "consisting of or including".
On the point raised by the hon. Gentleman about planning permission and developments that were projected and being considered before 5th November,

it will not make the slightest bit of difference.

Mr. Wise: I think it possible to accept the hon. Gentleman's explanation. It could have been boiled down quite simply to saying that the Clause was formerly in English and is now in gobbledygook.

Question put and agreed to.

Clause 5.—(MIXED INDUSTRIAL AND OFFICE DEVELOPMENT.)

Lords Amendment No. 3: In page 6, line 35, after "premises" insert:
or consisting of or including the extension of a building on land in Greater London by the addition of office premises together with other premises".

Mr. Darling: I beg to move, That this House doth agree with the Lords in the said Amendment.
The purpose is to exempt from the retrospective control in Greater London mixed industrial and office buildings for which both an I.D.C. and planning permission were granted before 5th November and for which no building contract was made before that date. We thought it was unreasonable to hold up until a permit could be considered for the ancillary offices any industrial project for which the Board of Trade was satisfied that an I.D.C. could be granted and which succeeded in getting planning permission before the announcement of the control.
But subsection (2) defines the scope of this exemption rather too narrowly—this has been drawn to our attention—because it covers only the erection of new buildings containing industrial and office space and not extensions of buildings containing industrial and office space. It is the difference between the erection of the new buildings and the extention of buildings The Amendment therefore brings extensions of mixed industrial and office space within the scope of exemption.
The Amendment was proposed by the Government on Third Reading to correct the drafting. It is very largely a drafting Amendment, because it was always the intention—this was agreed during the course of the Committee stage—to exempt both the new buildings and extensions consisting of industrial and office space


from the more severely retrospective control in Greater London. In view of the discussions that we had on this matter in Committee, I am sure that the Amendment will be accepted.

Mr. Robert Cooke: I can see the Government's point of view in urging acceptance of the Amendment. We have again heard that it is a question of drafting and putting right something which the Committee decided was the way this should be done. But I remind the Government that the proceedings in Standing Committee were confined to a small number of hon. Members only, and some of us who are here at this stage have a right to know a little more about it. The Government said they had been persuaded that this was the right thing to do. Who persuaded them? Perhaps it was some of my hon. Friends.
But enough of this. I hope that we shall not all the way through these Lords Amendments be told, "This is all right. This is something which was agreed at an earlier stage in which you did not all take part, but now it will be all right, chaps. It is just a drafting Amendment." Every time I come into the Chamber I am told that it is another drafting Amendment. It is a pretty sloppy Bill.
In case any hon. Member says that I am not a Member representing a constituency in Greater London, I gather that by some Order the Bill can be made to apply to all parts of the Kingdom, and the commercial city that I represent is just as much concerned in this as anyone else. So I hope that we shall have no more of this "drafting Amendment" stuff but a little more explanation.

12 m.

Mr. John Hall: I do not quite understand the anxiety expressed by my hon. Friend the Member for Bristol, West (Mr. Robert Cooke). It is quite true that the Bill could affect the area which he represents and we do not know how far it is likely to go. We have had many examples in recent weeks of what may be described as drafting Amendments, and one has to look at the drafting Amendments with some suspicion. May I say, to put the Minister's mind at rest, that I was overcome with admiration for the lucid way in which he explained this Amendment, and perhaps I may reassure my hon. Friend. It does improve

the Bill and follows efforts we have all been making, especially my hon. Friends, to improve the Bill. We would have no hesitation in supporting it.

Question put and agreed to.

Clause 7.—(PLANNING PERMISSION WHERE NO OFFICE DEVELOPMENT PERMIT REQUIRED.)

Lords Amendment: No. 4: in page 8, line 38, after "case" insert:
the erection of that building would not constitute
development to which this Part of this Act applies or (if it
would constitute such development)".

Mr. Jay: I beg to move, That this House doth agree with the Lords in the said Amendment.
I am glad to put at rest the mind of the hon. Member for Bristol, West (Mr. Robert Cooke) by assuring him that this is not a drafting but a clarifying Amendment.

Mr. Robert Cooke: Clarifying Amendment?

Mr. Jay: Yes, it is a clarifying Amendment. The hon. Member seems rather slow in taking the point.
This Amendment refers to the question of the incidental use of a building as an office. Under present planning law, permission for some other type of building, such as a shop, carries with it a right to use part of the building for offices if this is incidental to and included in the main use of the shop, as the hon. Member for Bristol, West knows. Clause 7 was to ensure that in future incidental use of a new building for office purposes was not extended beyond the 3,000 sq. ft. limit.
It appeared, however, that this qualification might possibly, as the Bill stood, have been thought not to apply to a building other than an office which contained no offices at all when it was originally erected. That, of course, was not our intention, nor that of hon. Members opposite. Thus, the Amendment makes it clear that any planning permission for a new building granted on or after 5th November, 1964, in the Metropolitan region or granted after the passage of the Bill in any area to which control applies, carries a condition that the building shall not at any time contain floor space used as offices which exceeds the exemption


limit of 3,000 square feet, and that applies equally to a building which did not contain offices when erected and to one that is not yet erected.

Mr. Peter Emery: We are delighted to have that explanation because, as the right hon. Gentleman will realise, his noble Friend in another place forgot his brief in explaining it and it was taken on an assurance that it was a good Amendment. I am also delighted that we were able to assist the Government in getting the last Amendment through and overcoming another of the rebellions that seem to be arising night after night on the benches opposite.
The Amendment will comply with the general view about an approval given for a shop and the accommodation that would go with it, and for that reason we are delighted to be able to support the Government in clarifying the position.

Question put and agreed to.

Clause 9.—(ENFORCEMENT NOTICES RE- LATING TO LAND IN GREATER LONDON.)

Lords Amendment No. 5: In page 11, line 30, leave out subsection (4) and insert:
(4) In so far as an enforcement notice to which this section applies requires any operations to be discontinued forthwith—

(a) the notice, notwithstanding anything in section 45(5) of the Act of 1962 (which provides that an enforcement notice shall take effect at the end of a period not less than 28 days after it is served), shall take effect immediately on its being served, and
(b) section 46(3) of that Act (whereby, on an appeal, an enforcement notice is of no effect while the appeal is pending) shall not apply to the notice;

but nothing in this subsection shall affect the operation of section 45(5) or section 46(3) of that Act in relation to such a notice in so far as the notice requires any other steps to be taken.

Read a Second time.

Mr. Graham Page: I beg to move, as an Amendment to the Lords Amendment, at end to add:
and the enforcement notice shall state specifically

(i) in respect of which operations it takes effect immediately and is not ineffective while an appeal is pending and
(ii) in respect of which operations it will take effect only at the end of such period (not being less than 28 days after the service

thereof) as shall be specified in the notice and will be ineffective while an appeal is pending".

Clause 9 deals with the enforcement notice served by a local authority or by the Minister upon the occupier of land to require him to remove or cease any unauthorised development, but it applies to rather a narrow type of notice, that which relates to land in Greater London, and is in respect of development for which planning permission was obtained after 5th November, 1964, and before the date that this Bill becomes law.
Such planning permissions are nullified by an earlier Clause. In that narrow category, the subsection (4) that was originally in the Bill made such an enforcement notice effective immediately on being served. This was a change in the general law because, under Section 45(5) of the Town and Country Planning Act, 1962, an enforcement notice takes effect at the end of a period stated in the notice and that period must not be less than 28 days. But these Greater London notices relating to post-November last planning permissions bite at once and take effect immediately they are served.
Subsection (4) also made a change in the law, in that an enforcement notice would not be suspended pending an appeal to the Minister under Section 46. Normally when an appeal is made under Section 46(3) the enforcement notice is suspended in its effect. As subsection (4) left this House it was quite cut and dried and clear. This kind of notice would take effect on service without waiting for 28 days, and no pending appeal would suspend it. But in another place it was observed that the enforcement notice could say two things. It could say "Stop building at once what you are building, because it has not now got planning permission", and, secondly, "Pull down what you have built."
It is quite right that the owner should not enable himself to go on doing unauthorised building just by the device of entering a notice of appeal, but it is wrong that he should be made to pull down a building before a final decision on that appeal has been reached. That point was raised in Committee in another place, and on Report the present subsection (4), which appears on the Order Paper of Lords Amendments as No. 5, was moved into the Bill. It is a fair


debating point that it was moved in by the noble Lord leading for the Opposition, but it was made quite clear in the debate that the words of the Amendment had been put into his mouth by the Government. In my submission they dealt only with a part of the problem, and did not go far enough. As the Amendment stands, considerable difficulty will be caused.
Under the new subsection (4) the Bill now authorises a dual-purpose notice—one saying that the owner shall cease forthwith doing something, and the second telling him what is to be done within a specified time. The rights and duties flowing from each part of a notice of that sort are different—different in effect on the notice and in the appeal from that notice. Unless the notice is very carefuly drawn to show these different results it will cause confusion in the mind of the recipient.
My Amendment is intended to obviate that confusion, and by ensuring that the position is clearly stated in the notice it will let the owner or occupier, or person to whom the notice is served, know exactly where he stands. If the Amendment is accepted a notice will have to state something as follows: first, "You are required to stop doing this forthwith. You can appeal to the Minister within 28 days against this order to stop, but despite that pending appeal you must still remain inactive until the appeal is settled", and, secondly, "You are also required to demolish the building which you have been building within, say, a period of three months. You can appeal to the Minister within 28 days against that part of the notice, and if you do appeal the three months will not start to run until the appeal has been decided."
That is what would have to be put on the notice if the Amendment were accepted. It is necessary that it should be made clear to the recipient of the notice what his rights are arising out of the two different parts of the notice.
The Bill certainly does not make light reading. It is not the sort of thing one can skim through in bed at night and understand what it means, or purport of which can be grasped in a few moments, and it is made more complicated by the proposed Lords Amendment. I want to simplify it for the men who have to deal with the Bill when it be-

comes law. We owe it to the public to see that the notices which are served under this Bill when it becomes law are clear, precise and definite.

12.15 a.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): The hon. Gentleman the Member for Crosby (Mr. Graham Page) said that he did not want to make a party point out of the fact that this Amendment had been moved by his noble Friends but had been drafted by Government draftsmen. I do not know why he should feel embarrassed at saying that. It merely illustrates the open-mindedness with which we have approached this Bill throughout and our anxiety, wherever possible, to liberalise and clarify it in the interests of the people who have to work it. I think the new subsection (4) does precisely that. It draws a clear distinction between the particular operations which have to be stopped forthwith and those which have to be done after the period of appeal.
I would first point out that the notice has to be either drafted by the Minister of Housing and Local Government or else under his direction. It is therefore something which he has to initiate, and it is reasonable to assume that it will be a notice which meets the requirements of the Clause and is clear, otherwise my right hon. Friend would serve it at his own risk. If it was vague and ambiguous and it was not clear what people had to do under it, then if my right hon. Friend tried to enforce it in the courts he would suffer for it.
Therefore it is reasonable to assume that these notices will explain what they are supposed to be doing in so far as an enforcement notice requires any operations to be discontinued forthwith. It must surely make clear what are the operations it is requiring to be discontinued forthwith, otherwise it would be quite ambiguous.
While I welcome what the hon. Gentleman said to try to clarify the Clause, I think the Clause in its present form is effective and I do not think his Amendment is necessary.

Question, That those words be there added to the Lords Amendment, put and negatived.

Mr. Graham Page: I beg to move, as an Amendment to the Lords Amendment, at the end to add:
and the whole of such notice (if it requires any operations to be discontinued forthwith) shall be registered as a local land charge immediately after service thereof notwithstanding that a part of it shall not at that time have taken effect".
Although I was prepared to accept the Joint Parliamentary Secretary's explanation in regard to the previous Amendment, I think there is a matter of real substance which arises out of this Amendment. As I explained on the previous Amendment, subsection (4) creates this dual purpose enforcement notice, part of it taking effect immediately and part of it taking effect perhaps in 28 days or whatever length of time is stated in the notice.
Now an enforcement notice has to be registered as a local land charge against the property. That is under Section 15 of the Land Charges Act, 1925. It is entered as a charge against the property in Part III of the appropriate local authority's register, and it has to be registered when it takes effect, and I stress the word "when". The date on which it takes effect is the time at which it is registered as a land charge, and I find that under Rule 9(b) of the Local Land Charges Rules, 1934, Statutory Instrument 284 of 1934, as amended by Statutory Instrument 1283 of 1948. If it is a "stop and demolish" enforcement notice then the parts of it will take effect at different dates. It seems rather silly to register it in two sections. The first part of it saying "Stop the work you are doing" will take effect immediately on service of the notice, and be registered at that moment as a local land charge. When the notice goes on to say that one must do some operation on the land, such as demolish the building which is being built, then it will take effect at such date as the building has to be demolished.
If the proposal in my Amendment is adopted the effect would be that one would register this enforcement notice at once—the whole of the notice. If the enforcement notice included any direction to do something forthwith it could be registered as a land charge at once, and the necessity of taking two bites at it, registering one part first and then another later would be avoided. It would also obviate the possibilitiy of some

authorities deciding not to register until the whole order takes effect. There is quite a serious danger that local authorities could construe the Clause, as it now stands, in that way. They might decide that, since part of the notice takes effect only at some future date, they will delay registration of it as a land charge until that part takes effect. If registration is delayed in that way a prospective purchaser who carries out a normal search of the local Land Charges Register would be misled.
It is a very important point for people buying and selling property. The local Land Charge Register should be correct. We are left in the air, as the Lords Amendment now stands, as to when the local land charge has to be registered. If we make it definite, that it has to be registered if it includes a forthwith order, immediately it is served then that solves the problem. I am sure this Amendment could be accepted without affecting the Bill adversely. This raises a point which was never discussed in another place, a point which needs to be put right, and if it is not there will be considerable confusion.

Mr. MacColl: The hon. Gentleman the Member for Crosby (Mr. Graham Page) has said, speaking with all his great authority on conveyancing matters, that this is a more serious point than the last Amendment. There is a difficulty here about what happens to a notice where it is in operation in the sense that it is biting but where it is not finally approved because there is still a right of appeal outstanding. I do not pretend to move as surely in these highly technical matters as the hon. Gentleman the Member for Crosby, but as I understand the general principle behind land charges, it has always been that they should be registered at the time when the restriction is firm. There should not be oscillations according to whether an appeal has taken place. Therefore I think that the best thing to do is to leave it as it is at present. I am not saying that I think the registration of local land charges is perfect by any means. I think it is common ground that they could be improved, but I do not think that the Lords Amendments to this Bill are the best point from which to start improving them. I think this might lead to repercussions in other spheres, where similar restrictions are in


existence. They cause blight even if they do not specifically have legal enforcement.
I think the whole problem of the effect of restrictions of this sort has to be looked at more generally. Probably the practical answer is that this is something which should be included in supplementary inquiries made by a person inquiring into land charges.
The supplementary inquiries would find if these enforcement notices were in existence, whether or not they were registered at the moment. In practice, it is not quite as important as the hon. Gentleman suggests. But I do agree that there are difficulties in local land charge registration generally that ought to be looked at, I hope, at some future stage, in a general review in the light of some of the criticisms that have been made.

Mr. Graham Page: With leave of the House, may I say that the Parliamentary Secretary is quite wrong in saying that when one registers land of this sort it becomes effective after the time for appeal has run out. It is defined under the land charges rules that registration has two steps when the notice becomes effective.
The Lords Amendment, which we are discussing now, quite definitely says that it becomes effective immediately it is served. The right moment at which to register part of the notice is when it is served and the next part of the notice is effective when the time for appeal has run out—normally 28 days. In this case, one notice would have to be registered at two different times.
This can be put right, not necessarily in this Bill, by Amendment to the land charges rules. Since the Parliamentary Secretary recognises that this is a practical point, may I ask him for an assurance that it will be put right in the rules?

Mr. MacColl: On the first point that the hon. Gentleman made, may I say that after our duels across the Table we often end up by writing letters to each other clearing up points. Sometimes I win the argument and sometimes he wins. The House never knows what state the game is in at a particular moment. On that first point, about whether there has to be a double registration, I will write to him if I am wrong.
I will look into the second point. But my feeling is that, unless there is in the parent Act some provision for linking it with rules made by the Lord Chancellor

covering land charges, you cannot do that. If it is found to be possible, however, I will write to the hon. Gentleman explaining the position.

Mr. Page: With that assurance, I beg leave to withdraw my Amendment.

Amendment to the Lords Amendment, by leave, withdrawn.

Lords Amendment agreed to.

Clause 10.—(POWER TO REQUIRE INFORMATION AS TO BUILDING CONTRACTS.)

Lords Amendment No. 6: In page 13, line 16, at end insert:
Provided that the time specified in such a notice for furnishing any information or producing any document shall not be earlier than the end of the period of twenty-eight days after the service of the notice.

12.30 a.m.

Mr. Darling: I beg to move, That this House doth agree with the Lords in the said Amendment.

Mr. John Hall: Is the Minister taking, at the same time, Lords Amendment No. 7, which, I think, is consequential?

Mr. Darling: No. That will come next.
As all hon. Members will be aware, Clause 10 empowers the Board of Trade to serve a notice requiring evidence of the existence of a building contract or information concerning the owner of the land in a case where office development is taking place in accordance with planning permission granted before 5th November. Hon. Members will also be aware that by Clause 10 the notice may specify the time within which the information is to be supplied. The Amendment establishes that it shall not be less than 28 days.
In Committee, hon. Members drew attention to the absence of a time limit for complying with a notice served under Clause 10 and suggested a maximum of 28 days. On Report, we introduced a new subsection which gave the Board of Trade power to specify a time limit in each case and also the time and place where the documents must be produced. We agreed to look at the matter again, however, and this Amendment was moved in another place pursuant to that undertaking.
The Amendment means that we have not prescribed a maximum of 28 days


for all cases, because we think that it would be reasonable to allow a longer period in some cases. A minimum of 28 days should, however, be a generous allowance where the information required is readily available.

Mr. John Hall: I think that all my hon. Friends would wish to thank the Minister for having the Amendment introduced in another place. As he has said, it was the result of suggestions made by the Opposition in Committee and, again, it is the result of a suggestion by my hon. Friend the Member for Reading (Mr. Peter Emery) that we have had the benefit of the Amendment. We are grateful that it has been introduced.

Question put and agreed to.

Lords Amendment No. 7: In page 16 line 7, at end, insert new Clause A.—(Service of notices.)
A.—Section 214 of the Act of 1962 (service of notices) shall have effect in relation to the service on any person of a notice which (not being authorised or required to be served on him under that Act) is authorised or required to be served on him by virtue of this Part of this Act, as that section has effect in relation to notices authorised or required to be served under that Act.

Read a Second time.

Mr. Graham Page: On a point of order, I believe, Mr. Deputy-Speaker, that my Amendment to the Lords Amendment, at the foot of page 4463 of the Amendment Paper, in line 5, leave out "this Part of", has not been selected. I wish, however, to raise the point that, unfortunately, this Amendment was printed in the wrong place on the Paper. I do not in any way blame the Clerks of the Public Bill Office, who are so extremely helpful on these occasions and seldom go wrong. The fault must have been entirely mine.
It will, however, be seen that Lords Amendment No. 7 and Lords Amendment No. 8 both relate to page 16, line 7, and that both of them contain the words
this Part of this Act".
My Amendment in line 5 was intended to be an Amendment to Lords Amendment No. 8 but, somehow, it appears on the Amendment Paper before my next Amendment, which makes it appear that it is an Amendment to Lords Amendment No. 7.
I was hoping that after I had dealt with my second Amendment, in line 7 of Lords Amendment No. 7, I might ask you to reconsider your non-selection of my Amendment to Lords Amendment No. 8 and have it in the right place on the Amendment Paper.

Mr. Deputy-Speaker (Sir Samuel Storey): The hon. Member has had an opportunity to check this before and he should have raised the matter earlier. I cannot allow him to move his Amendment when we come to the Lords Amendment No. 8.

Mr. Graham Page: In that case, I beg to move, as an Amendment to the Lords Amendment, at the end to add:
Provided that subsections (2) and (3) of the said section 214 shall not apply to the service of a notice under section 10 of this Act.
Section 214 of the Town and Country Planning Act, 1962, authorises the service of notices in certain different ways. Subsection (1) authorises the service of notices by manual delivery to the person on whom they have to be served, or by leaving them at the usual or last known place of abode of that person, or by leaving them at the address which that person has registered as an address for service, or by sending them by prepaid registered letter or recorded delivery to the usual or last known place of abode or address registered for service, or, in the case of a company, by sending them to the secretary or clerk by registered or recorded delivery at the company's registered office. Those are the normal ways of service set out in Section 214(1), and I have no objection whatever to any of those applying to notices under Clause 10 of the Bill.
I cannot help feeling that in another place the noble Lord who was dealing with this Clause on behalf of the Government led my noble Friends a little bit up the garden path on this matter. He said:
Under Section 214 of the 1962 Act a notice may be served on a person in any of the following ways: (1) by delivering it to him; (2) by leaving it at his usual or last-known address; (3) by sending it by prepaid registered letter or recorded delivery to that address; and (4), in the case of a company, by delivering it or sending it by prepaid registered letter or recorded delivery to the clerk or secretary of the company at their registered or principal office. This, as the noble Lords will readily understand, is purely consequential, and I beg to move."—[OFFICIAL REPORT,


House of Lords, 18th May, 1965; Vol. 266, c. 405.]
The noble Lord did not cover the whole of Section 214. He recited only the normal forms of notice of service. If one reads the rest of that Section, one sees that it allows service in several different ways. It allows service by addressing a letter merely to the owner or the occupier without setting out on the notice or letter the name of the person on whom it is being served. It allows a notice to be served by delivering it to some person on the premises who may not be the person to whom the notice is addressed, or against whom future proceedings may have to be brought. It allows service of notice by fixing it conspicuously to some object on the premises, such as nailing the writ to the mast.
My objection is to those forms of service as applied to this Clause. They may be right in certain circumstances under the Town and Country Planning Act, 1962, but they should not apply to Clause 10, because this Clause concerns the requirement by the Board of Trade for information about building contracts. That is all that it is concerned with. Normally, it will be the owner who will hasten to the Board of Trade with this information.
The owner will want to say, "I am carrying out this development under a building contract which was made before 5th November, 1964. I want to show you this and to show you that I am doing it right." He may say that to justify his claim that he comes within the relief provisions of the Bill. If he does not do that the local planning authority will serve an enforcement notice on him.
Clause 10 gives the Board of Trade power to require the information by serving on him a notice and requiring it to be given in the time specified on that notice. By Lords Amendment No. 6, which the House has accepted, that notice must be of not less than 28 days. There are serious consequences if the person to whom the notice is addressed fails to provide the information. The notice may be served on the grantee of the planning permission. It may be served on the owner of the land, the developer or builder carrying out operations on the land. If he fails to comply with the notice, he may be liable to a maximum fine of £100.
That is not the sort of case which one contemplates in serving notices on the property by leaving them with someone on the property or pinning them up somewhere on the property. These are not cases of absentee landlords or of someone trying to hide away. People on whom notices under Clause 10 will be served are those trying to develop a site and they will be well known to the local planning authority. There is no reason why they should not be served personally or in the normal way by prepaid registered post or recorded delivery. There is no reason to place on these people the risk of failing to comply with a notice because they do not know that it has been served, for example because it was left with some irresponsible person on the site or affixed to what some not very intelligent process server thought a conspicuous object on the site.
Section 214, in subsections (2) and (3), provides for the "Give it to Charlie" or the "Nail it on the toilet door" sort of service. This is not appropriate to the type of notice under Clause 10. Subsections (2) and (3) should be excluded in these cases.

Mr. Jay: I regret that the hon. Member for Crosby (Mr. Graham Page) failed to serve sufficiently conspicuously his notice of the Amendment which we are not discussing. His present Amendment seeks to limit the application of Section 214 of the 1962 Act in respect of serving of notices under Clause 10 of this Bill. He thinks that we should not have the power under the Bill where there is difficulty in obtaining the name of the person on whom the notice should be served to take the exceptional measures he explained under Section 214, subsections (2) and (3), of the 1962 Act. I agree that my noble Friend in another place did not tell the whole truth about that Act, although he told a great deal of it. No doubt that was for the sake of brevity rather than any wish to mislead noble Lords.
Although I should expect it to be only rarely and in the last resort that this particular method of serving a notice would be used, nevertheless, we feel that the power should be retained because we cannot be sure that there might not be cases where it is impossible to discover the name of the owner in any other way. It is possible, for example, that the


original applicant to whom planning permission was granted may have sold the land and might conceivably not be able to say who the present owner is. There can also be cases of joint ownership where there would be difficulty in finding out the ownership in the relevant cases.
Therefore, I think it wise to retain this power for use in the last resort, although we would not expect that it would be at all frequently used.

12.45 a.m.

Mr. Graham Page: I beg to ask leave to withdraw the Amendment.

Mr. Sydney Silverman: No.

Mr. Deputy-Speaker: Is it the wish of the House that the Amendment be withdrawn?

Hon. Members: No.

Question, That those words be there added to the Lords Amendment, put and negatived.

Mr. Jay: I beg to move, That this House doth agree with the Lords in the said Amendment.
This proposed new Clause A, as has been rightly said, is neither drafting nor clarifying, but is consequential on the previous Amendment which we have discussed. Its intention is to define what service of a notice means in this case. What it does is to make clear that service of the notice has the same meaning in Part I of the Bill as under Section 214 of the Town and Country Planning Act, 1962 which we have just discussed.
In view of the previous discussion, I do not think I need expound any further what the powers are for serving a notice under that Act.

Question put and agreed to.

New Clause B.—(ANNUAL REPORT.)

Lords Amendment No. 8: In page 16, line 7, after Amendment last inserted, insert new Clause B:
B.—As soon as may be after the end of March 1966 and after the end of March in each subsequent year the Board of Trade shall prepare a report on the performance of their functions under this Part of this Act, and shall lay the report before Parliament.

Mr. Jay: I beg to move, That this House doth agree with the Lords in the said Amendment.
The proposal here is that the Government should make an annual report to Parliament on the operation of the office control. That seems to us a reasonable proposal. It would, no doubt, conveniently coincide with the Board of Trade's present reports on the use of the I.D.C.s under the Local Employment Act. We, are, therefore, very glad to accept this proposal.

Mr. Channon: May I say what an admirable Amendment this is and how grateful we are that the Government have agreed to accept it.
Could the Minister say what sort of things will be included in this report? Presumably there will be a list of office development permits which have been applied for, those which have been accepted and those which have been rejected in the various areas to which the Bill applies. Also, will the London area be split up slightly more selectively instead of dealing with the area as a whole? The President of the Board of Trade has said on many occasions that it will be necessary to deal with different parts of the London region in slightly different ways.
Will the report reflect his policy as it is split up for Central London and for outer London? This would be extremely valuable, as it would enable people to know exactly how the right hon. Gentleman administers the Act in each year of its operation. I hope that he will be able to give an explanation, though not necessarily tonight, of the way these reports will be prepared, and that he will say whether he will be able to go into slightly more detail than merely dealing with them region by region.
Can it be shown how the Act is operating in each county or county borough, or some suitable area that is defined such as the London region or any other region that may come under the Act?

Mr. Jay: I would not like to suggest that we have fully and in detail decided on the form that these reports should take. However, I have taken note of what the hon. Gentleman for Southend, West (Mr. Channon) has said. It is in mind at present to give the total number of O.D.P.s which have been approved, the total number rejected, and perhaps the square footage involved in each case. I


would have thought, again subject to further consideration, that it would probably have been possible to divide those figures into broad areas, such as the Greater London Council area on the one hand and the rest of the metropolitan region on the other. But we have not finally decided the details.

Mr. Peter Emery: May I support the plea that details should be given of the number of rejections, because only then will it be possible to judge what is happening? I should like a direct assurance, if it could be given, that the number of rejections will be included in a report.

Question put and agreed to.

Clause 17.—(POWER TO VARY EXEMP- TION LIMIT AS TO INDUSTRIAL FLOOR SPACE.)

Lords Amendment No. 9: in page 19, line 44, at end insert
being not less than 1,000 square feet".

Read a Second time.

Mr. Peter Emery: I beg to move, as an Amendment to the Lords Amendment, to leave out "1,000"and insert "2,500".
I do not intend to go over the arguments that I deployed in moving a similar Amendment to Clause 2, because the present Amendment affects the industrial side rather than the office side. But I must make it quite clear that the Government are reducing from 5,000 sq. ft. to 1,000 sq. ft. their ability to limit the extension of an industrial development.
It is a serious matter and, after the Report stage, at about 2.27 a.m. on 15th April, I hoped that we had seen the end of the Bill, with the assurance that we would not find the Government considering that they would want to limit industrial development below a figure of half what it is at the moment; in other words, 2,500 sq. ft. We have the minimum, which was not then spelt out, accepted in another place.
I hope that the President of the Board of Trade will not try to suggest that we are being ungrateful for what my noble Friends in another place have been able to achieve. Certainly, we are grateful: my noble Friends were able to get put into the Bill something which we had not been able to do.
If we are attempting to ensure that industries shall be encouraged by the

Board of Trade to expand and to be progressive in their whole outlook, it is proper that large firms who will need large expansions should have industrial development certificates for them. But, as the President of the Board of Trade is only too well aware, for the tens of thousands of small firms that make up British industry, an expansion means something below 5,000 sq. ft.
If the right hon. Gentleman really believes that a small or medium-sized firm will move away from its present factory in order to put up just another shed or another extension amounting to 2,499 sq. ft. or below, I suggest that he is crazy. If that is so, why cannot we give this assurance to industry that it is now, and will always be, safeguarded. Up to this moment industry has been completely in the knowledge that it would be able to build anything up to 5,000 sq. ft. without an I.D.C.
I accept that the President is concerned about the matter of people getting round the regulations. I believe that the powers remain under the Town and Country Planning Act, 1962, to enable the matter to be dealt with without this regulation. I will not go into that argument again. I accept that the President is concerned about this, but I would have hoped that we could have dealt with it without this Amendment.
Although, in Committee, the Minister of State gave an assurance that every co-operation would be afforded in the light of the link that exists in regard to applications, I do not consider that that is good enough. No criterion of sympathy or understanding is laid down. As we know only too well, sympathy expressed in Committee may have very little to do with the application of the Act when it is in regional offices and the actual words in the Act have to be spelt out.
We believe that it would be in the Government's interest and particularly in the interests of industry for it to be clear that the Government would at no time consider limiting the industrial development that any firm may want to a level under 2,500 sq. ft. It is for that specific purpose that we move the Amendment.

Mr. Jay: In an earlier speech I fully explained to the hon. Gentleman why we felt that it was not possible to reduce


this limit other than to 1,000 sq. ft. Experience has shown that in the case of the I.D.C.s there has been a tendency, not over the whole country but in the more congested areas, for buildings of less than 5,000 sq. ft. to be put up in such a way that over a period of time the control could be considerably evaded. I would not suggest that this has happened or is likely to happen on a mass scale, but the evidence definitely is that it has happened on a scale which might have endangered the effect of the control. Therefore, we think that it is necessary to have the power that we are proposing in the Bill. I fully recognise that there is a difference of opinion between us on this issue. I think that we have reduced it to a very small compass, and I only regret that I cannot go all the way to meet the hon. Gentleman.

Question, That "1,000" stand part of the Lords Amendment, put and agreed to.

Lords Amendment agreed to.

Clause 18.—(AMENDMENT OF SECTION 39 OF ACT OF 1962.)

Lords Amendment No. 10: in page 21, line 38, at end insert:
() In accordance with the preceding subsection, but subject to the next following subsection, section 39 of the Act of 1962 shall have effect as set out in Schedule (Section 39 of the Town and Country Planning Act 1962, as amended) to this Act.

Mr. MacColl: I beg to move, That this House doth agree with the Lords in the said Amendment.
Perhaps it would be convenient to take the following Amendment and Amendment 15 which is the new Schedule A—"Exemption of certain classes of development."

Mr. Deputy-Speaker: That would be convenient.

Mr. MacColl: When we were in Committee my recollection is that we supplied for hon. Members a copy of Section 39 of the 1962 Act as amended by the Bill, which was found to be a considerable convenience. In another place it was suggested that it might properly be included in the Bill and that is what these Amendments do. The remaining Amendments on the Notice Paper are the same operation translated into Scots. I think that this will be found convenient for the public and people who have to look at the Clause.

Mr. Graham Page: I compliment the hon. Gentleman on adopting this course of putting the new Clause complete into the Schedules. I hope that this is a precedent which may be followed more. It has been adopted in some cases in the past, but not enough. It makes it clear what the Amendments do.

Question put and agreed to.

Remaining Lords Amendments agreed to.

ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. Ifor Davies.]

Adjourned accordingly at four minutes past One o'clock.